(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "The Management Of Labor Relations"

TIGHT BINDING BOOK 



S<OU 160424 >m 



QUP~2272 19-1 1-79 JD,OOQ 

OSMANIA UNIVERSITY LIBRARY 

Gall No. . . *??. * ^ Accession No 



Title 

.This book should be returned on or before the date last 
marked below. 



THE MANAGEMENT 

OF 

LABOR RELATIONS 



BY 

GORDON S. WATKINS, PH.D. 

Professor of Economics 
University of California at Los A nodes 

AND 

PAUL A. DODD, PH.D. 

Assistant Professor of Economics 
University of California at, Los Angeles 



FIRST EDITION 
FIFTEENTH IMPRESSION 



McGRAW-HILL BOOK COMPANY, INC. 

NEW YORK AND LONDON 
1938 



COPYRIGHT. 1938, BY THE 
McGiiAW-HiLL BOOK COMPANY, INC. 



PRINTED IN THB UNITED STATES OF AMERICA 

All rights reserved. This book, or 

parts thereof, may not be reproduced 

in any form without permission of 

the publishers. 



COMPOSITION BY THE MAPLE PRESS COMPANY, YORK, PA. 
PRINTED AND BOUND BY COMAC PRESS, INC., BROOKLYN, If. Y. 



TO 

A. D. W. 

AND 

B. J. D. 



PREFACE 

Many developments have taken place since the publication of 
Labor Management by Gordon S. Watkins in 1928. This is strik- 
ingly true of American economic life and particularly of labor 
relations. The past decade has witnessed significant changas 
which already have had a marked effect upon points of view, 
attitudes, and practices in the field of personnel administration. 
The unprecedented growth of American unionism with the conse- 
quent expansion of collective bargaining, the appearance of an 
increasingly militant leadership in the American labor movement, 
the extension of progressive social legislation, the active interest of 
political leaders in the improvement of standards of employment; 
and the accumulation of authoritative data through research in the 
field of industrial relations have resulted in the development of 
new techniques to aid in the solution of old and new problems. 

The net result of what has just been said is that no book on labor 
relations written a decade ago is adequate either for classroom 
instruction or as a reliable guide to personnel executives in dealing 
with new problems and situations which have emerged in the 
interim. For all practical purposes, therefore, the present volume 
is a new book even though it was undertaken originally as a revision 
of Labor Management. Fvery effort has been made to incorporate 
the latest available information on significant changes in industrial 
relations and the techniques that have proved effective in meeting 
such changes. Both the results of special research and the practical 
experience of American industry, business, and government have 
been drawn upon generously to give concreteness to the problems 
discussed and the methods of procedure adopted to deal with them. 
The influence of the rapid expansion of unionization and of progres- 
sive social legislation upon labor relations is definitely recognized, 
and the possible consequences of further changes are discussed. To 
simplify and clarify the analysis of the numerous problems and 
techniques, statistical data, charts, graphs, and forms have been 
scattered throughout the text. A comprehensive selected list of 
references has been included in order to aid students, personnel 
executives, and general readers who may wish to make a more 
intensive study of particular problems. 



viii PREFACE 

The authors have drawn freely and widely upon the research 
and experience of special students and numerous corporations. It 
would be impossible here to acknowledge their debt of gratitude 
to ail of these individually. Wherever possible, their assistance is 
acknowledged in the body of the text and in the footnotes. 

In conducting the research necessary for the completion of their 
task, the authors have received excellent assistance from Miss 
Frances M. Fearing. Anna Davis Watkins and Bonnie Jennings 
Dodd have read the manuscript and the proof. Their encourage- 
ment and criticism have been invaluable. 

GORDON S. WATKINS, 
PAUL A. DODD. 

UNIVERSITY OF CALIFORNIA AT Los ANGELES, 
August, 1938. 



CONTENTS 

PAGE 

PREFACE vii 

PART I 
THE NATURE AND DEVELOPMENT 

OF PERSONNEL MANAGEMENT 
CHAPTER 

I. THE NATURE OF PERSONNEL PROBLEMS 3 



Conflict in Employment Relations, 3 Responsibility for 
Discontent, 5 The Constituent Problems, 6 Attitudes and 
Methods of Approach, 8 The Absence of a Panacea, 11 
Fundamental Assumptions of Personnel Administration, 11 
Recognition 01 the Acquisitive Character of Industry and 
Business, 11 Rejection of the Commodity Concept of Labor, 
13 The Necessity^ofjCoordination between Mechanical and 
Human Factors, 14 The Difficulty of Human^Administratipii, 
IIP The Possibility of Scientific Management of Labor Rela- 
tions, 15 Identity of Interests in Industry, 16 The Desires 
and Aims of the Parties to Industry, 16 The Needs and 
Desires of Employees, 17 The Needs and Desires of the 
Employer, 18 The Community's Needs and Desires, 18 The 
Scope of Our Study, 19. 

II. THE DEVELOPMENT OF LABOR RELATIONS 21 

The Changing Character of Employment Relations, 21 The 
Early Status of Labor Relations, 21 The Status of the Worker 
under Slavery, 23 The Status of the Worker in the Rural 
Community of the Middle Ages, 24 The Worker in the Urban 
Community of the Middle Ages, 25 The Passing of the Old 
Order, 27 The Birth of Capitalism, 28 The Doctrine of 
Economic Freedom, 29 The New Capitalism and the Relations 
of Capital and Labor, 30 The Revival of Social Regulation, 32. 

III. THE NATURE AND FUNCTIONS OF MANAGEMENT 33 

The Complex Structure of Modern Industry and Business, 33 
Management and Its Functions. 36 Scientific Management,. 

37 Expansion of the Taylor System, 41 Accurate Objective 
Analysis, 42 Establishment of Standards, 42 Maintenance 
of Standards, 42 Opposition to Scientific Management, 43. 

IV. PERSONNEL MANAGEMENT 46 

The Inception of_ Specialized Management j>f Personnel^ 46 
TEe InHTspensabiiity of Specialized Administration of Labor 



X CONTENTS 

CRA?TKX ^ PAOB 

Relations, 49 The Motivation of Specialized Personnel Con- 
trol, 51 The Requisites of Successful Personnel Management, 
52 The Need for a Functionaiized_Persoimel Department, 
53~rreliminary Steps in the Establishment of a Personnel 
Department, 53 Essential Nature of the Personnel Job, 54 
The Meaning of Punctionalization in Personnel Management, 
55 Line and Staff Organization in Personnel Management, 
56 Coordination with Other Staff Departments, 58 Correla- 
tion of Policy, 59 Labor and Production Policies, 59 Labor 
and Sales Policies, 59 Labor and Purchasing Policies, 60 
Labor and Financial Policies, 60 The_ Status ofbhc 
Department, 62 The General Functions i^o 
.Department, 62 Interrelation of Functional Divisipns, 63. 

V. THE RISE OP A NEW PROFESSION 65 

Reasons for the Employment of Special Personnel Executives, 
65 The Desire to Assure Adequate Attention to Personnel, 
65 The Necessity of Safeguarding Long-run Interests of Man- 
agement and Employees, 66 The Need for a Balanced Empha- 
sis, 66 The Desirability of Centralized Control of Human 
Relations, 67 The Need for Interpretation of the Workers' 
Point of View, 67 The Necessity for Eliminating Old Prejudices 
and Fallacies, 68 The Need for Developing Personnel Tech- 
nique, 68 The Personnel Manager's Difficult Task, 68 Dela- 
tion to the Management, 69 Relation to Operating Officials, 
69 Relation to the Rank and File, 69 Relation to the Com- 
munity, 70 The Status of the Personnel Manager, 71 Quali- 
fications of the Personnel Director, 72. 



PART II 
PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

VI. PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 77 

A Basic Psychological Truth, 77 The ^Meaning of Human 
Naiiire, 77 Original and Acquired^Traits, 79 The_ReJ&lk)ii 
oOtod^j^d^jVfcnd, 82 The Emotions, 82- Habits^ 85- 
^Psychology and the ControTof Human NaturcT^^^PsychO' 
.technology and the Problem^ of Personnel Relations, 87 
iVlanagement's fStake^irT the Control of Human Factors, 89 
The Changeability of Human Nature, 90 Repression of Human 
Traits, 92 Industrial Significance of Repression, 93 The 
Need for Intelligent Direction, 94 Hmnau^ Nature in Our. 
Machine Civilization, 95. 

VII. PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS (Continued) , . 96 
Mainsprings of Human Behavior in Industry, 96 Creative 
Experience in Work, 97 The Acquisitive Desire, 102 Gre* 
gariousness, 105 Pugnacity and Rivalry, 107 The Play 
Impulse, 108 Self-Assertiveness, 109 Submissiveness, 110 



CONTENTS xi 

CHAFTBB PAGK 

Sex and Parental Bent, 111 Sensitiveness to Approval and 
Disapproval, 113 Curiosity, 113 Fear, Flight, and Migra- 
tion, 115 The Function of Reason in Personnel Administration, 
115. 

PART III 
THE TECHNIQUE OF SELECTION AND PLACEMENT 

VIII. JOB ANALYSIS, SPECIFICATION, AND STANDARDIZATION 110 

Importance of Scientific Job Analysis, 119 The Meaning of 
Job Analysis and Specification, 120 Development of Job 
Specification, 122 Need for Job Analysis and Specification, 
124 Purposes and Uses of Job Analysis, 125 The Use of Job 
Specifications in Hiring, 125 Job Specifications and Job Grad- 
ing, 126 The Relationship of Job Analysis to Wage Rates, 126 
Job Specifications as an Aid to Transfers and Promotions, 
127 Job Study and Employee Training, 127 Job Specifica- 
tions and Grievances, 128 Job Analysis in Relation to Indus- 
trial Research, 128 An Outline of Job Analysis, 130 Method 
of Procedure in Making the Job Analysis, 132 Illustration of 
Job Analysis and Occupational Rating, 134 Advantages 
Accruing from Job Specification, 138 The Job Analyst and 
His Qualifications, 141. 

IX. RECRUITMENT OF PERSONNEL, 143 

Importance of the Supply of Labor, 143 Influence of Immigra- 
tion upon American Supply of Labor, 144 What Recruitment 
Means, 146 The Community Survey, 148 Outline of Sources, 
148 Present Employees. 149 Friends of Present Employees, 
150 Former Employees, 151 Voluntary Applicants, 151 
Institutions of Learning, 153 Private Employment Agencies, 
153 Public Employment Exchanges, 156 Advertising, 159 
Scouting, 161 Cooperation between Employment Depart- 
ments, 163 Miscellaneous Sources, 163 The Conference 
Method of Controlling Recruitment, 164. 

X. SELECTING THE WORKER 166 

Careful Selection Indispensable to Efficiency, 166 Value of 
Proper Selection, 167 The Basis of Successful Selection and 
Placement, 168 Methods of General Selection, 169 Selection 
by Application, 171 The Oral Interview, 175 Preliminary 
Interview, 176 Final Interview, 178 Selection by Reference, 
178 Selection by Group Rating and Character Analysis, 180. 

XI. TESTS AS AN AID IN GENERAL SELECTION 186 

The Function of Tests in Selection and Placement, 186 
Requirements of an Acceptable Intelligence Test, 187 Selec- 
tion by Intelligence Tests, 188 Results of Mental Tests in 
Industry, 191 Limitations and Weaknesses of Mental Tests, 



xii CONTENTS 

CHAPTER ^ PAGE 

198 Physical Tests and Examinations as Selective Aids, 200 

Rejecting the Applicant, 202. 

XII. SCIENTIFIC PLACEMENT: PRINCIPLES AND PROCEDURE 204 

Relationship between Selection and Placement, 204 : Requisi- 
tions for Help, 205 Special Ability Tests, 206 Achievement 
Tests, 208 Principles Governing the Formulation of Place- 
ment Tests, 212 Analyzing Personality and Vocational 
Interest in Placement, 214 Introducing the New Worker, 219 
Follow-up Technique, 221. 

PART IV 
THE MAINTENANCE OF PERSONNEL 

XIII. LABOR TURNOVER 227 

What Is Labor Turnover? 227 Undesirability of Complete 
Stability of the Working Force, 228 Methods of Measuring 
Labor Turnover, 229 Basis of Separations, 229 Basis of 
Replacements, 229 Basis of Distinction between Avoidable 
and Unavoidable Separations, 230 Labor- turnover Computa- 
tions of the Department of Labor, 232 Turnover Records and 
Their Analysis, 234 Extent and Cost of Labor Turnover, 238 
Causes of Labor Turnover, 243 Conditions Responsible for 
Voluntary Separations, 245 Some Reasons for Layoffs, 247 
Reasons for Dismissal, 248 Incidence of Labor Turnover, 
249 The Relation of Occupation and Skill to Labor Turnover, 
249 Sex in Relation to Labor Turnover, 251 Age and Educa- 
tion as Factors in Labor Turnover, 252 Nationality as a Fac- 
tor, 253 Length of Service in Relation to Labor Turnover, 254 

Mentality and Labor Turnover, 255 General Environmental 
Influences and the Rate of Labor Turnover, 256 Methods of 
Reducing Labor Turnover, 257 Adequate Statistical Control, 
257 Scientific System of Recruitment, Selection, Placement, 
and Follow-up, 257 Job Analysis and Specifications, 257 
Enlightened Labor Supervision, 258 Joint Control, 258. 

XIV. ABSENTEEISM AND TARDINESS 259 

Absenteeism, 259 Extent and Measurement of Absenteeism, 
260 The Causative Factors, 261 Causes Existing in the 
Industry or the Plant, 261 Causes External to the Industry, 
262 Causes Arising in the Lives and Experiences of the 
Workers, 262 Distribution of Absentee Frequency, 264 
Some Economic and Social Results, 266 Methods of Improve- 
ment, 268 The Case for the Bonus Plan, 274 Some Pre- 
requisites to Improvement, 275. 

XV. THE STIMULATION OF INTEREST 276 

Cooperation and Interest in Industry, 276 Stimulation of 
Interest a Problem of Good Management, 278 General 



CONTENTS xiii 

CHAPTER PAGB 

Interests, 279 Maintaining Interest through Financial Bonuses, 
280 Use of Production and Cost Records, 281 Contests as a 
Means of Increasing Production and Curbing Costs, 283 
Sharing of Information, 285 Written Methods, 289 Load 
Building Program of the Philadelphia Gas Works Company, 
292 Miscellaneous Methods, 294 The Ultimate Effects, 296. 

XVI. TRANSFER, PROMOTION, AND DISMISSAL 297 

Definitions, 297 Causes Leading to Transfer, 297 Why 
Promotions Are Necessary, 301 Some Preliminary Steps, 303 
Job Analysis in Relation to Transfers and Promotions, 303 
The Eligibility List, 304 A Proper Scale of Occupational 
Wage Rates, 304 A Clearly Defined Basis for Transfers, 305 
Initiating an Acceptable System, 306 The Basis of Promotion, 
307 An Open Promotion Policy, 308 Maintaining Individual 
Records, 309 Rating Employees for Promotion, 309. 

XVII. TRANSFER, PROMOTION, AND DISMISSAL (Continued) .... 315 
The Three Position Plan of Promotion, 315 The Understudy 
System, 316 Promotion from Within, 318 Request for 
Advancement, 319 Promotions Up and Out, 320 Wage 
Increases as a Substitute for Promotion, 320 Blind-alley or 
Dead-end Jobs, 321 Responsibility for Transfers and Promo- 
tions, 322 Factors Limiting Transfer and Promotion, 322 
Causes Leading to Discharge, 323 Discharge Warning, 323 
Responsibility for Discharge, 324 Government Regulation 
Concerning Discharge for Union and Other Activities, 327 
Layoff, 328 The Dismissal Wage, 329. 

XVIII. WAGES AND WAGE SYSTEMS ' 332 

The Significance of Wage-payment Systems, 332 Definitions 
and Methods of Procedure, 333 Methods of Wage Payment, 
334 Time Wages, 335 Evaluation of the Time-wage Principle, 
337 Piece-rate Schemes: Ordinary Plan, 340 Guaranteed 
Straight Time-wage Plan, 344 Group Time or Bonus System, 
345 Profit Sharing, 347 The Sliding Scale, 352 The Problem 
of Rate Setting, 355 Salary Standardization, 356 Objectives 
of Standardization, 357 Constructing the Salary Groups, 358 
Advantages of Wage Standardization, 360. 

XIX. FINANCIAL INCENTIVES 362 

Positive and Negative Incentives, 362 Classification of 
Financial Incentive Systems, 362 Incentive Systems in Which 
Gains and Losses Accrue to the Employee Exclusively, 363 
Piece-rate or Straight Commission System, 363 Taylor Dif- 
ferential Piece-rate Plan, 365 Merrick Multiple Piece-rate 
Plan, 367 Incentive Plans in Which Gains Are Shared Jointly, 
368-Halsey Gain-sharing Plan, 368 The Rowan Premium 
Plan, 370-^The Gantt Task and Bonus System, 372 The 



XIV 

CHAPTER 



CONTENTS 

I 

Bedaux Point System, 375 Other Efficiency-bonus Plans, 376 
Incentive Plans with Two Variables, 376 Emerson Efficiency 
Plan, 376 Miscellaneous Plans, 380 Incentives for Executives, 
380 The Workers' Reaction to Efficiency Wage Plans, 382 
Basic Principles for the Improvement of Efficiency Systems, 384. 



XX. EMPLOYEE STOCK OWNERSHIP 387 

General Character of the Movement, 387 The Rise and 
Decline of the Movement, 388 Reasons for Initiating Stock- 
ownership Plans, 389 Possible Variations in the Plans, 390 
General Features of Typical Plans, 391 Some Encouraging 
Results, 395 Failures and Their Causes, 397 Conditions of 
Success, 397 Opposition to the Movement, 398 Some Neces- 
sary Precautions, 400. 



XXI. THE EDUCATION AND TRAINING OF EMPLOYEES 



402 



Need for Training Programs, 402 The Purposes of Training, 
404 Types of Training, 405 Job Training, 405 The Vestibule 
School, 407 Apprenticeship Training, 409 National Appren- 
tice Training Plan, 410 Introductory Training for College 
Students, 412 The Goodyear Flying Squadron, 412 The 
Loop Course of the Bethlehem Stool Company, 414 General 
Electric Test Course and the Westinghouse Graduate Student 
Course, 416 Floating Training Courses of Banks, 417 
Other Training Programs for College Graduates, 417 Voca- 
tional Training, 418 Cooperative Courses, 419 General 
Cultural Education and Americanization Work, 419~~Some 
Typical Apprenticeship Plans, 420 Extent of Ordinary Train- 
ing Programs, 425 Retraining Programs, 426 The Advantages 
of Training, 427 Fundamentals of a Good Training Program, 
428 Social Responsibility for Employee Training, 429. 

XXII. THE TRAINING OF EXECUTIVES 431 

Executive Training, 431 Recruitment and Selection of Candi- 
dates, 433 Methods of Executive Training, 434 Content of 
Executive Training Courses, 435 Foremanship and the 
Problems of Personnel Administration, 436 Executives' Per- 
sonnel Responsibility, 439 Planning an Executive-training 
Program, 440 Training Plans of Individual Organizations, 441 
Public Aid for Instructor Training Courses, 444. 



XXIII. THE EMPLOYEE MAGAZINE 446 

Development of the Employee Magazine, 446 Some Pre- 
liminary Inquiries, 447 Fundamental Purposes of Publica- 
tion, 447 Contents, 449 The Editor: His Job and Qualifica- 
tions, 452 Organization, Mako-up, Distribution, and Control, 
453 Accomplishments of the Employee Magazine, 456 Why 
Plant Magazines Fail, 456. 



CONTENTS xv 

CHAPTER PAOB 

XXIV. SAFEGUARDING THE WORKER'S HEALTH 459 

The Human Machine in Industry, 459 The Peculiar Nature 
of Illness, 459 Payment of Wages during Illness Periods, 
468 Meeting This Loss through Insurance Schemes, 461 
Reasons for the Slow Development of Health Insurance in the 
United States, 462 Specific Occupational Hazards to Health, 
462 Aims of Industrial Medicine, 463 Typical Medical 
Service Programs, 463 Protective Work of Industrial Medical 
Departments, 467 Industrial Fatigue, 468 Manifestations 
and Consequences of Fatigue, 469 The Major Causes of 
Fatigue, 470 Remedial Measures, 472 The Industrial Physi- 
cian, 474 Organization and Functions of the Medical Depart- 
ment, 475 Physical Examinations, 477 First Aid and Follow- 
up, 479 Health Instruction, Inspection, and Investigation, 480 
Other Services of the Medical Department, 480 Equipment, 
481 Health Records and Reports, 482 The Cost of Medical 
Service in Industry, 482 Conditions of Success, 483. 

XXV. INDUSTRIAL ACCIDENTS AND THEIR PREVENTION 485 

Need for Safety Measures, 485 Tardy Recognition of the 
Problem, 485 The Human Toll of Modem Industry, 486 
The Economic and Social Cost of Industrial Accidents, 488 
Causes of Industrial Accidents, 490 The Safety Movement in 
the United States, 492 Workmen's Compensation and the 
Growth of Accident Prevention, 493 Influence of Casualty 
Insurance Companies in Accident Prevention, 496 Manage- 
ment's Responsibility for Safety, 498 Foremen: The Keymen 
:n Safety, 499 Physical and Mechanical Safeguards, 499 
Safety Organization, 501 Educational Methods, 502 
Employee Magazine and Safety Education, 504 Educating the 
New and Young Worker in Safety, 505 The Health Depart- 
ment's Part in Safety, 506 Does Accident Prevention Pay? 
506 Conditions That Impede Progress, 508. 

XXVI. HOURS OF LABOR IN RELATION TO HEALTH AND OUTPUT . . . 509 
The Problem of Hours in Modern Industry, 509 The Length of 
the Working Day, 511 The Fair Labor Standards Act of 1938, 
512 Movement toward the 5-day Week, 512 The 6-hour 
Day, 514 Hours and Output, 515 Other Factors Influencing 
Output, 519 Scientific Management and the Reduction of 
Hours, 521 Overtime Work, 521 Nightwork, 523 Sunday 
Labor, 524 Rest Periods, 526 Holidays and Vacations, 528. 

XXVII. THE PHYSICAL ENVIRONMENT OF WORK 531 

The Importance of Physical Environment, 531 Good House- 
keeping in Industry, 532 Lighting and Its Effects, 532 Essen- 
tials of Proper Lighting, 533 Artificial Illumination, 535 The 
Comparative Merits of Natural and Artificial Lighting, 536 
Cost and Advantages of Proper Illumination, 538 Heat and 



xvi CONTENTS 

CHAPTER PAOU 

Ventilation, 541 Noise, Vibration, and Rhythm, 544 Posture 
and Seating, 546 Excessive Muscular Strain, 547 Clothing, 
548 Drinking Water, 548 Washing and Bathing Facilities, 
549 Fire Protection, 551. 

XXVIII. THE STABILIZATION OF EMPLOYMENT 552 

The Unemployment Problem, 552 Losses Due to Unemploy- 
ment, 554 Contributing Causes, 558 A New Point of View, 
564 The American Approach, 565 Voluntary Employment 
Stabilization Methods, 567 Extension of Seasonal Markets, 
567 Budgeting Control and Business Forecasting, 567 
Manufacturing for Stock, 568 Diversification of Products, 
568 Standardization and Simplification, 569 Producing for 
Sale, 569 General Personnel Policies, 569 Voluntary Unem- 
ployment Insurance Schemes, 572 Forces Leading to Establish- 
ment of Compulsory Unemployment Compensation, 575 
Unemployment Provisions of the Social Security Act, 577 
State Unemployment Reserves and Insurance Laws, 578. 

XXIX. PROBLEMS OF THE AGED WORKER 581 

The Aged Employee in Industry, 581 Problems Involved, 
581 Finding the Problem Cases, 582 Adjustments in Present 
Work, 583 Transfer to Another Task, 584 Retiring the 
Worker, 586 Development of Pension Systems in the United 
States, 587 Voluntary Industrial Old-age Pensions, 588 
Some Specific Retirement and Annuity Plans, 590 Trade- 
union Pension Plans, 592 Federal Old-age Pensions under the 
Social Security Act, 593 Maintenance of Wage Records for 
the Federal Pension System, 595 Railway Retirement Act of 
1935, 597. 

XXX. MISCELLANEOUS PERSONNEL SERVICES 599 

Welfare Services in Industry, 599 Company Housing, 600 
Cooperative or Company Stores, 603 Lunchrooms and 
Restaurants, 603 Restrooms and I/)ckcr Rooms, 606 Recrea- 
tional Opportunities and Facilities, 606 Legal and Financial 
Aid and Advice, 609 Educational Refund Plans, 612 Vaca- 
tions with Pay, 613 -Handbooks and Suggestion Systems, 614 
Disability Funds, 615 Group Insurance, 617 Mutual Benefit 
Associations, 618. 

PART V 
CIVIL SERVICE PERSONNEL 

XXXI. LABOB RELATIONS IN THE CIVIL SERVICE 623 

Importance of Public Service, 623 -Extent and Nature of Civil 
Service Employment, 623 Recent Trends in Government 
Personnel, 626 Misconceptions Regarding Civil Service, 628 
Earnings of Civil Servants, 629 Structure of the Federal Civil 



CONTENTS Xvii 

CHAI*TB PAGE 

Service, 631 Other Personnel Functioning Bodies of the 
Federal Government, 634 Personnel Policies in the Public 
Service, 636 Recruitment and Selection, 637 Civil Service 
Training, 640 Salaries and Promotion Policies, 646 Disci- 
pline, Tenure, and Discharge, 649 Retirement for Public 
Employees, 651 Miscellaneous Public Personnel Policies, 654 
Sick Leave and Layoff, 655 Credit Unions, 656 Public 
Service Employee Organizations, 656 Unions in the Public 
Service, 657 Recommendations for Improvement of Public 
Service, 660. 



PART VI 
JOINT RELATIONS AND COLLECTIVE BARGAINING " 

XXXII. ORIGIN AND NATURE OF EMPLOYEE REPRESENTATION 665 

The Concept of Democracy in Industry. 665 Why Employee 
Representation Is Necessary, 667 Meaning of Joint Control 
in Industrial Relations, 669 Background 6T the WnTtley 
CounciT Scheme oT Great Britain, 670 Reports of the Whitley 
Committee, 671 The Plan at Work, 672 Influence of Whitley 
Council Program upon Personnel Policies of Individual Organi- 
zations, 673 Weaknesses of the British Scheme, 674 Develop- 
ment of Employee Representation in the United States, 676 
Principles of Collective Bargaining, 678^ Types of Employee 
Representation, 679 Patterns of Nontrade-union Representa- 
tion m the (Jnited States, 682 The Federal Plan, 683 The 
Joint-committee Plan, 684 The Employ co-association Plan, 
686 Reasons for the Growth of Employee Representation, 687. 

XXXIII. EMPLOYEE REPRESENTATION PLANS IN OPERATION 689 

General Purposes, 689 Essential Preliminary Steps, 689 
Organization and Powers, 690 Basis of Representation, 691 
Qualifications of Employee Voters and Representatives, 691 
Nominations and Elections, 692 Organization and Meetings, 
693 -Duties and Powers of Works Committees and Joint 
Councils, 693~-The Cultivation of Mutual Understanding, 694 

- Collective Bargaining.^ fjflyi Adjustment of Grievances and 
Complaints, 695 Control of Production Technique, 695 
Control of Welfare Sendees, 697 Typical Employee-representa- 
tion Plans, 697 Accomplishments of Representation Plans, 
703 Constitutional Government under Trade Agreements, 
704 Interpretation and Application of Trade Agreements, 
707 Typical __Cpjlectivo Labor Agreements, 709 Individual 
Union Management Agreements, 711. 

V 

XXXIV. RECENT LEGISLATION AND COLLECTIVE BARGAINING 714 

Practices Leading to Governmental Regulation, 714 Collective 
Bargaining under the National Labor Relations Act, 717 



xviii CONTENTS 

CHAPTER PAGE 

Chief Weaknesses of the National Labor Relations Act, 719 
Employee Bargaining under the Railway Labor Act, 720 
Railway Labor Act in Operation, 723 Other Adjustment 
Boards, 724 Criticism of Nonunion-representation Plans, 724 
Employee-representation Plans as a Substitute for Unions, 
726 The Economic and Social Justification of Employee ^ 
Representation, 729. 

PART VII 
CONCLUSION 

XXXV. AN APPRAISAL OF PERSONNEL MANAGEMENT 735 

SELECTED REFERENCE LIST 739 

INDEX 755 



PART I 

THE NATURE AND DEVELOPMENT OF PERSONNEL 
MANAGEMENT 



CHAPTER I 
THE NATURE OF PERSONNEL PROBLEMS 

Conflict in Employment Relations. The phrase " personnel 
problems " immediately suggests the fundamental nature of the 
difficulties with which our study deals, namely, points of conflict 
in the relations between employers and employees. Maladjust- 
ments are constantly present in the relations of workers to their 
particular jobs, their fellow workers, or the employment conditions 
in general. The cumulative effect of such maladjustments is 
invariably reflected in the loss of good will between management 
and men, which in turn yields such undesirable results as diminished 
efficiency and increased unrest among the working force. 

These conflicts in employment relations are commonly designated 
by the comprehensive term "industrial unrest." Such unrest is 
admittedly one of the major problems of modern industry and 
business. Indeed, conflict in employment relations has become so 
pronounced in advanced industrial countries such as the United 
States arid Great Britain as to constitute a source of great anxiety 
for those who are entrusted with the responsibility for the orderly 
functioning of our economic organization. At frequent intervals, 
the struggle between capital and labor is so acute as to threaten 
the security and permanence of the social order. 

Troubles within the industrial family may be viewed more or 
less philosophically as the "growing pains of an. industrial system 
in transition," or idcalistically as the "birth pangs of a new society" ; 
hence, to be accepted with fatalistic indifference. This means that 
nothing can or should be done about them. On the other hand, 
they may be interpreted as an unmistakable symptom of unremedied 
pathological conditions in the organization and operation of par- 
ticular industrial and business establishments. That is, we may 
look upon industrial discontent and the individual problems of per- 
sonnel which constitute it as diseases, the causes of which need 
to be diagnosed in order that appropriate and effective remedies 
may be found and applied. The task of making the diagnosis and 
providing workable solutions is the major function of personnel 
management. 

3 



4 THE NATURE OF PERSONNEL MANAGEMENT 

However much partisan or even disinterested students of labor 
problems may differ in their analyses of the conflicts between 
management and men or in their attitudes toward the necessity for 
an immediate solution, the reality of the phenomenon as an eco- 
nomic and social problem is undeniable. Indeed, the currents of 
social progress are constantly diverted from their normal channels 
by the crosscurrent of industrial strife. At not infrequent intervals 
it is practically impossible for the community to steer its way 
through the rapids of industrial crises, and employers are com- 
pelled either to operate their establishments at reduced capacity or 
to keep them completely idle. Cordial employment relations cul- 
tivated through years of industrial peace are abruptly, sometimes 
thoughtlessly and unjustifiably, destroyed by recurring epidemics 
of strikes, lockouts, and other forms of industrial warfare. The 
flow of economic goods and services is arrested because the normal 
activities of industry and trade are interrupted. 

The serious consequences of conflicts in industry are, of course, 
not confined to the immediate financial losses of the disputants. 
Innumerable persons who are in no way responsible for the griev- 
ances suffer serious inconvenience and hardship. Moreover, as 
the general strike with its revolutionary purposes and methods has 
taken its place among the weapons of organized labor and employers 
have perfected unprecedented solidarity in opposing the demands 
of unionized employees, strife is intensified and prolonged. The 
growing interdependence of the constituent divisions of our com- 
plex economic order makes the life of the whole community sen- 
sitive to disturbances in industry and trade. 

Many employers who are free from the necessity of dealing with 
labor unions often contend that as a consequence their plants are 
not infested with unrest and its resultant wastes and inefficiencies. 
They forget that the problem of industrial unrest cannot be meas- 
ured in terms of observable manifestations, such as strikes and 
boycotts. There is frequently a more subtle form of rebellion, no 
less real because it is concealed, the existence of which often remains 
practically unknown to employers and is seldom sensed by the com- 
munity. This phase of working-class revolt finds its expression in 
soldiering on the job, consciously practiced inefficiency, uncon- 
scionable waste of materials, neglect and abuse of machinery and 
equipment, and other forms of peaceful sabotage which are per- 
petrated by large numbers of modern wage earners. Employers 
often erroneously assume that this kind of retaliation for unfavor- 
pble conditions of employment is confined to unionized plants. 



THE NATURE OF PERSONNEL PROBLEMS 5 

Impartial investigation has yielded convincing evidence to the 
effect that peaceful sabotage obtains regardless of the existence or 
nonexistence of unionization. 1 

Responsibility for Discontent. If it were possible definitely to 
fix the responsibility for these divers forms of maladjustment in 
employment relations, workable solutions could quickly be devised. 
The determination of responsibility in particular instances is, how- 
ever, extremely difficult, if not impossible. 

Wage earners, labor leaders, and irreconcilable critics of modern 
industrialism are quick to blame employers for the conflicts that 
arise in industry, attributing to them sordid motives of selfishness 
and exploitation. The validity of such an indictment is, unfor- 
tunately, too frequently supported by undeniable evidence from the 
pages of economic history. There is a regrettable tendency among 
workers and their leaders to forget that such conflicts are very often 
the inevitable result of their own consciously practiced waste and 
inefficiency, the natural consequence of their own fears, suspicions, 
and hatreds. There is, moreover, abundant evidence of the fact 
that the workers often surrender to self-seeking, ignorant, corrupt, 
emotional leadership which is either unwilling or unable to think in 
terms of mutual interests or to give rational consideration to 
programs of mutual advantage. 

On the other hand, employers and those who share their uncom- 
promising defense of the existing economic system in its totality too 
frequently attribute all discontent to an inherent obstinacy and 
radicalism on the part of the workers and their leaders. It seldom 
occurs to the average employer that part, often a very large part, 
of the difficulty lies in his own reactionary attitude toward change 
and improvement in the economic status of the wage earners, his 
persistent opposition to practically all forms of progressive labor 
legislation, his unrelenting antagonism to the unionization of his 
employees, and his own irrepressible suspicions, fears, and hatreds. 
Nor can employers escape responsibility for that considerable 
volume of unrest, which has emerged more or less as a direct result 
of their own preoccupation with the technical problems of produc- 
tion and distribution, to the almost total neglect of the human 
factor in industry and business. Nobody knows better than they 
how often employers have surrendered to unwise, incompetent, 
emotional, and selfish leadership. 

1 See, for example, S. B. Mathewson, Restriction of Output among Unor* 
ganized Workers. 



6 THE NATURE OF PERSONNEL MANAGEMENT 

Obvious as is the contribution which both employees and 
employers make to the ever-present stream of industrial unrest, 
only superficial judgment finds the responsible factors in the 
philosophy and psychology of these principal parties to industry. 
The disinterested observer will discover that the causes of trouble 
are much more complex than this and are inseparably related to 
numerous other factors. Among these are the technological com- 
plexity and the integration of the structure of business, the inter- 
dependence and interrelationship of industry and finance, and the 
separation of ownership from management and control. In addi- 
tion to these factors, there are certain others, such as the persistence 
of undesirable conditions of employment, the continuance of unrea- 
sonably long working shifts, the absence of an equitable relation 
between work and pay, the insecurity of the job, and the absence 
of machinery for the peaceful adjustment of grievances. 

The Constituent Problems. What has been said concerning the 
fundamental causes of friction in employment relations suggests 
that the general problem of industrial discontent may in the last 
analysis be a composite one, the constituent elements of which are a 
rather extensive series of integral problems. And that is true. 
The real problems of personnel relations consist of difficulties which 
revolve about the selection, placement, and maintenance of the 
working force, and the development of ways and means of sharing 
certain phases of managerial control with employees. Industrial 
unrest is merely the manifestation of maladjustments which obtain 
in the involved and intricate relations of men to jobs, of manage- 
ment to men, and of both to the broader aspects of our economic 
and political systems. 

Unity and balance in employment relations conduce to a maxi- 
mum of justice, peace, and productivity. When, however, that 
unity and balance are disturbed or destroyed, friction appears and 
with it emerges industrial ill will. The constructive function of 
personnel administration is to devise effective ways and means ol 
maintaining unity and balance in all employment relationships. 
These objectives are achieved whenever there exists the maximum 
degree of coordination between the worker and his job, between the 
job and the conditions which conduce to the greatest efficiency, 
and between both of these and the managers of technological and 
human factors in the enterprise. 

Looked at more closely, the integral problems, which are con- 
stantly disturbing, often destroying, the unity and balance of 
employment relationships, are extremely formidable. In the first 



THE NATURE OF PERSONNEL PROBLEMS 7 

place, there are difficulties which arise in connection with the 
selection and placement of the working force. Numerous troubles 
occur because desirable and adequate sources of labor supply 
have not been developed. Even if the sources of labor supply are 
satisfactory, stability and efficiency of the working force may be 
adversely affected because proper technique of selection and place- 
ment are lacking. Successful selection and placement, however, 
depend basically upon an adequate knowledge of the jobs for which 
employees are selected and into which they are to be placed. That 
is why the absence of job analysis and job description so frequently 
contributes to such maladjustments as excessive labor turnover, dis- 
satisfaction, and incompetence. It is obvious, therefore, that 
industrial peace, good will, and efficiency, which are the objectives 
of intelligent personnel administration, invariably begin with proper 
recruitment, selection, and placement. These in turn begin with 
scientific analysis of jobs and occupations. 

A firm may have discovered the importance of developing proper 
methods of recruiting, selecting, and placing personnel and yet be 
troubled with numerous evidences of friction in its employment 
relations. In. such cases the basic difficulties may lie in the failure 
to introduce effective policies and methods of labor maintenance. 
Briefly this means the development of ways and means of keeping 
employees contented, efficient, and loyal. Such results are incon- 
ceivable in the absence of equitable treatment on the job and 
throughout the entire work relationship. 

The problems of labor maintenance are numerous and often 
extremely acute. One set of these problems appears in excessive 
turnover and mobility of personnel, abnormal absence and tardiness, 
and the lack of interest in the job and the company. Problems and 
difficulties of personnel administration arise also in connection with 
transfers, promotions, dismissals, wages, and financial incentives. 
Much of the inefficiency and unrest in a plant may be due to the 
absence of adequate facilities for the training of employees and 
executives, or to the failure to provide other mediums of education 
and training. Considerably more serious, however, are the troubles 
which issue from the existence of employment conditions that 
adversely affect the health of the workers or expose them to unneces- 
sary risks to limb and life. No less serious are the difficulties which 
are bred by excessive hours of labor, irregularity of employment, 
and the absence of economic security. 

Employers who have introduced progressive methods of selec- 
tion and placement and who, to their own satisfaction at least, have 



8 THE NATURE OF PERSONNEL MANAGEMENT 

established desirable conditions of work, an equitable wage scale, 
and measures of economic security, are still sometimes confronted 
with what appear to be serious grievances on the part of their 
employees. In such cases the difficulties develop from the demand 
of the working force for the establishment of collective Bargaining. 
That is, the workers desire a voice, very often an effective voice, 
in the determination of conditions and policies which affect their 
interests. Thus arise the problems of joint control which invariably 
are among the most perplexing in the whole category of personnel 
difficulties. 

The acuteness of the troubles which arise in connection with the 
demand for collective bargaining, especially when the demand pre- 
supposes the recognition of an independent labor organization, is 
attributable to the fact that such a demand strikes at the very 
foundation of the rights, privileges, and prerogatives traditionally 
cherished by employers as exclusively their own. On the other 
hand, with the growth of political democracy and its attendant 
elevation of the status of the wage earner, the workers are inclined 
to regard the establishment of collective bargaining as an indis- 
pensable condition not only of the expansion of their rights and 
privileges but also of their protection against industrial autocracy. 
Experience indicates that neither party is likely to yield ground on 
this vital issue without a struggle, often reinforced by the use of 
such coercive weapons as the strike and the lockout. 

The earnestness and intensity with which the demand for col- 
lective bargaining is pressed by the workers and opposed by the 
employers may be easily understood when one remembers that the 
acceptance of joint agreements and their enforcement are tanta- 
mount to the inauguration of constitutional government in industry. 
Such a step is not only of major importance to the two principal 
parties to industry but is pregnant with serious potentialities, some 
good and some bad, for the community at large. Conflicts over 
workers' representation in the councils of management assume 
proportions that dwarf other problems of personnel relations. 

Attitudes and Methods of Approach. So extensive a list of per- 
sonnel problems as has just been enumerated presents a most 
impressive assignment for those who are responsible for the success- 
ful management of industry and business. A similarly heavy 
responsibility is likewise imposed upon the leaders of labor. The 
solution of such difficult problems necessarily impinges upon the 
basic attitudes and methods with which particularly critical situa- 



THE NATURE OF PERSONNEL PROBLEMS 9 

ions are approached. If employers or employees, or both, 
ipproach the difficulties with indifference or antagonism, progress 
,oward lasting settlements is quite improbable. If, on the other 
land, the approach of both parties is characterized by a sincere 
lesire to discover fundamental causes of friction and to construct 
nutual agreements based upon justice and fair play, effective solu- 
ions are invariably forthcoming. 

Because they are prejudiced parties, motivated by economic 
lelf-interest, perhaps it is expecting too much to hope that the 
lisputants will attack the problems with the objectivity and detach- 
nent of the scientist. Yet, it is only as this is done that mutually 
satisfactory settlements can be reached. 

It is too pessimistic a point of view, we think, to urge that the 
>arties to industrial grievances are incapable of attacking such 
grievances with a degree of rationality. In the final analysis, the 
itmospherc of industrial conflict must be cleared of the emotional- 
sm which invariably fills it before joint conferences are possible and 
he grievances of the moment can be examined with any assurance 
>f successful negotiations. It is of primary importance, therefore, 
hat both employers and labor leaders be taught to think in terms of 
he simple relationship of cause and effect. Once this result is 
bchieved, the probabilities of amicable adjustments are greatly 
ncreased. 

A primary requirement of scientific management is that it 
hall make a rational analysis of the conditions and forces which 
>roducc friction, distrust, suspicion, enmity, and conflict between 
mployers and employees. Successful control of human factors in 
ndustry and business is necessarily constructed on a foundation of 
cientific analysis. Management must approach the problems 
>f human relationships with the objectivity that has character- 
zed its approach to problems of technical improvement of production 
,nd methods of merchandising. It can scarcely be urged too 
requently or too strongly that maladjustments in human relation- 
hips are definitely the result of ascertainable causes. Workers do 
tot often consciously become inefficient, willfully waste materials, 
,rbitrarily damage machinery and equipment, or summarily leave 
he service of their employers for no reason at all. The reason may 
>e illogical or inadequate, but it exists and requires thoughtful, dis- 
passionate attention. Such attention involves a desire to inves- 
igate and examine facts and conditions, a capacity to see these 
onditions and facts in relation to specific grievances, a willingness 



10 THE NATURE OF PERSONNEL MANAGEMENT 

to pursue discovered data through to their logical conclusion, and a 
determination to apply what appears to be the most promising 
and appropriate remedy. 

Unfortunately, the adoption of a rational scientific attitude and 
its attendant method of approach is often precluded by the per- 
sistence of certain traditional points of view. Among employers, 
one frequently finds a smug indifference, a sort of managerial 
fatalism, which is totally oblivious to the conditions that incessantly 
disrupt the peace of industry. Sometimes management is aware of 
such conditions but either lacks a sufficiently vital interest to exam- 
ine their relation to accumulated grievances; or, as is more often the 
case, management adopts a definitely antagonistic attitude which 
renders impossible a rational analysis of causes and an amicable 
settlement of disputes. 

Still another attitude not uncommonly found among employers 
is the result of traditional individualism, the by-product of the 
philosophy of laissez faire, which almost completely dominated the 
industrialism of the eighteenth and nineteenth centuries and 
persists in the twentieth. This is an attitude born of the tenacious 
belief in the master and servant relationship. It assumes the 
existence of the inalienable natural rights and equally inalienable 
privileges of the master class, and the preordained subjugation of 
the masses. It fears the humanizing and democratizing tendencies 
of modern times, uncompromisingly opposes the projection of 
unionism into employment relations, denounces the expansion of 
governmental control of employment conditions, and issues dire 
warnings concerning the potential evils that lie beneath the sur- 
render of established rights and prerogatives. 

Obstructive attitudes and tactics are not the exclusive possession 
of employers. The workers and their leaders frequently harbor 
points of view which preclude a rational consideration of grievances 
and the discovery of peaceful settlements. Emotional adherence 
to the doctrine of exploitative capitalism, the theory of the class 
struggle, and the philosophy of the revolutionary function of indus- 
trial strife is not conducive to an objective and rational examination 
of disputes or of possible means of adjustment. Fortunately, it is 
only the social revolutionists among the leaders of labor who 
believe that there can be no durable amelioration of the status of 
the worker within the framework of capitalism. The vast majority 
of labor leaders still believe in economic opportunism, that is, in 
the wisdom and practicability of labor-management cooperation. 
Evidence of such belief is abundant in the innumerable trade-union 



THE NATURE OF PERSONNEL PROBLEMS II 

agreements with employers, and in the effective agencies of con- 
ciliation and arbitration. 

The Absence of a Panacea. Even so cursory a review of the 
elemental problems of personnel management as the preceding 
pages attempt suggests the complexity and intricacy of the diffi- 
culties which necessarily confront those who are responsible for the 
development of practicable remedies. It is obvious to everyone, 
except the fanatical believer in cure-all nostrums, that there is no 
single remedy. Each problem in its turn requires separate treat- 
ment. There exists no alchemist of industrial relations who can 
dispense a single specific for all the ills of industry. Viewed prac- 
tically and realistically, the " labor problem," so-called, is a com- 
posite of constantly varying grievances, each as different from its 
predecessor as it is likely to be from its successor. That is why 
there can be no solitary solution. Here, as in all fields of human 
activity, experience constitutes the most dependable guide; results 
are the only acceptable test of adequacy. 

Fundamental Assumptions of Personnel Administration. It is 
in the spirit of realism that the management of labor relations, as a 
division of the general science of management, approaches the con- 
flicts which arise between employers and employees. Not that 
personnel management is devoid of a spirit of idealism; indeed, it 
is often accused by both employers and wage earners of being 
excessively idealistic. But it necessarily deals with realities, 
because it has to do with jobs and men, and the relation of both to 
industrial and business enterprise. Realism and practicality are 
imperative under such circumstances. These attributes of per- 
sonnel science, if it can be called a science, are revealed in its 
fundamental assumptions. 

1. Recognition of the Acquisitive Character of Industry and 
Business. Personnel administration recognizes that the primary 
purpose of industry and business in a capitalistic society is to make 
money, that profit making is their essential motive. Ours is 
basically an acquisitive society. So long as the field of economic 
activity is free to individual initiative, enterprise, ingenuity, and 
ambition, the gains of industrial and business enterprise will con- 
tinue to challenge the resourcefulness of individuals, and profits 
will remain as the motive force to economic endeavor. And so 
long as profit making is the raison d'&re of economic activity, 
management will sustain its interest in economical and efficient 
operation. It is a law of economic life under capitalism that that 
enterprise which is organized and operated in the most efficient 



12 THE NATURE OF PERSONNEL MANAGEMENT 

manner on the least expensive basis will survive and prosper. An 
understanding of this salient fact is essential to a clear conception 
of the reasons for the emergence of problems of industrial relations 
under modern industrialism. 

In their anxiety to make profits, the owners and managers of 
industry have been so engrossed in the improvement of technical 
processes, in the procurement of adequate supplies of raw materials, 
in keeping costs of production at the minimum, and in the dic- 
tatorial control of employment conditions, that serious abuses have 
crept into employment relations. Much thought and attention 
have been given to problems of production technique; compara- 
tively little consideration has been given, until recently, to the 
technique of human administration. 

What personnel science is rapidly teaching management in this 
matter of profit making is this: There is not necessarily a conflict 
between the accepted purposes of economical and efficient enter- 
prise, on the one hand, and intelligent, humanized administration 
of employment relations, on the other. In fact, many of the 
exponents of progressive personnel policies urge that, in the last 
analysis, permanently profitable industry or business depends upon 
the successful management of human relations. If economic 
experience proves anything, it is that industrial good will is a first 
requisite of productive enterprise. 

Employers have rather generally recognized that profitable 
industry and business depend upon certain well-defined condi- 
tions. There must be an adequate supply of capital for the original 
organization and initial operations, together with additional 
amounts of capital to meet the needs of expansion. Credit must be 
available as needed. There must be a sufficient supply of raw 
materials at reasonable cost, and an efficient technical organiza- 
tion for the conversion of these into finished products. An adequate 
and competent supply of labor must be recruited. Organizing and 
directing ability must be obtained to utilize mechanical arid human 
forces to their utmost potential capacity. Markets must be found 
to assure sustained sale of the product. 

What the employer has not always realized is that an adequate 
supply of labor and technical factors is not in itself a guaranty of 
efficient production. The good will and cooperation of the workers 
must be obtained if the best results are to be forthcoming. The 
science of personnel management, therefore, appropriately reminds 
the employer that intelligent and equitable control of human 
factors is no less indispensable to economy and efficiency than are 



THE NATURE OF PERSONNEL PROBLEMS 13 

the scientific organization and direction of mechanical forces. 
And yet a distinguished American captain of industry was voicing 
the point of view of many of his fellow capitalist employers when he 
declared that the management of industry is primarily a manage- 
ment of things. 

2. Rejection of the Commodity Concept of Labor. Personnel science 
is constructed on the basic belief that labor is not a commodity. 
From this point of view it is only one-half of a truism to say that 
management of industry and business is essentially a management 
of things. The other half (the more important one) is that manage- 
ment of industry and business is fundamentally a management of 
persons. It would be more nearly accurate perhaps to say that 
industrial administration is in reality a management of persons in 
relation to things; that is, in relation to materials, machinery, 
equipment, processes, jobs and the whole enterprise, both in its 
persona] and its impersonal elements. The term "labor" is, after 
all, only a convenient word referring to a multiplicity of human 
beings who possess minds, personalities, self-respect, a desire for 
improvement, hold membership in a civilized community, and have 
numerous other attributes which preclude their identification with 
inanimate, material commodities. 

Labor resembles a commodity in that, like other objects of 
exchange, it commands a price on the market. The quality of 
exchangeability, however, does not reduce human beings to the 
level of impersonal things. The energy and skill which are sold 
by the laborer are inseparable from his life and personality; these 
are essentially a part of himself. What happens to the commodities 
which a merchant sells is of no consequence to him once they are 
delivered and paid for. The purposes for which these goods are 
used, the method of using them, and what finally happens to them 
do not concern him in the least. It is quite otherwise with the 
worker who sells his labor power; he must accompany what he sells, 
and the conditions and methods of its use are of vital concern to him. 
His own immediate welfare, the welfare of his family; his future 
and, consequently, the future of those who depend upon his eco- 
nomic efforts; his health, and his very life all are invariably 
involved in such a transaction. 

There are other important differences between laborers and 
commodities which all personnel departments worthy of the name 
fully recognize. Commodities have a relatively high degree of 
mobility and can be shipped readily to the most favorable market. 
Laborers enjoy no such mobility; financial considerations, family 



14 THE NATURE OF PERSONNEL MANAGEMENT 

ties, inertia, fear, ignorance of more favorable markets, and numer- 
ous other factors restrict the free migration of the average workman. 
Labor, moreover, is characterized by extreme perishability and, 
like perishable commodities, it must often be sold^t a forced sale 
on an unfavorable market. The average worker cannot afford to 
wait for a more attractive opportunity to sell his skill and energy, 
since to him a day lost is irretrievable. Seldom does the merchant 
find the disposal of his product of such vital importance as is the 
sale of labor power to the wage earner. The worker's financial 
reserve is usually so small that idleness for more than a brief period 
is likely to entail severe hardship. 

The replacement of labor is comparatively a difficult and slow 
process, since it normally depends upon the birth rate and the 
growth of human beings. Long periods of time are thus required to 
replenish a country's labor supply. The replaceability of com- 
modities is usually only a matter of days or months. 

Finally, labor is not, like commodities, a passive object. Rather 
it represents conscious human personalities with a mosaic of native 
and .acquired tendencies, socially determined modes of behavior, 
and an almost insatiable desire for a more complete life. Active and 
alert to new sources of satisfaction and happiness, workers as 
human beings are naturally sensitive to new comforts, new 
pleasures, and improved standards of living which education and 
acquisitive industry and business bring to their attention. More- 
over, workers are as capable of resentment as they are of coopera- 
tion; hence, they will not accept willingly any attempt either to 
depress their established standards of living or to prevent progres- 
sive improvement in their ways of life. 

3. The Necessity of Coordination between Mechanical and Human 
Factors. Intelligent administration of personnel rests partially on 
the assumption that the successful coordination of mechanical and 
human forces is a primary requirement of the fulfillment of the 
socially defined aims of industry and business. Those aims center 
about service to the community. " Service" is a term which in the 
business world has been almost wantonly moralized, hence has 
become trite. Nevertheless, it is an inescapable fact that the basic 
function of Industry and business is to produce commodities and 
render service, upon both of which the welfare and advance of the 
community necessarily depend. To this function of service profits 
are incidental; no enterprise remains profitable for long unless it 
provides a commodity or a service which the consumer needs and 
desires, The sustained flow of goods and services is possible only 



THE NATURE OF PERSONNEL PROBLEMS f 

when men and women are so managed as to assure successful 
operation. 

4. The Difficulty of Human Administration. The solution of 
problems of personnel relations often appears to the outsider a 
relatively simple matter. Personnel managers, intimately asso- 
ciated as they are with the intricate ramifications of those relations, 
know better. Experience has convincingly demonstrated to them 
that the management of human relations in industry is attended 
with far greater difficulties than is the management of mechanical 
factors. The most perplexing problems are invariably those that 
revolve about the human equation. That equation involves the 
relation of the worker to his work, his immediate supervisors, his 
company, his community, and, in turn, the relation of these to him. 

The perplexities arising in the administration of men and women 
develop from a fact already suggested; namely, that the human 
factor is not a passive, inanimate one, as are machines and materials, 
but rather is an active agent capable of cooperation or noncoopera- 
tion. The inborn traits of human beings are not easily appre- 
hended; much less easily are they directed into defined channels. 
In a democratic community, moreover, laborers are endowed with 
a large number of rights, privileges, and opportunities which they 
expect the managers to recognize and respect. 

5. The Possibility of Scientific Management of Labor Relations. 
Although it fully recognizes that the control of human forces is 
characterized by less certainty and more difficulty than is the case 
with material and mechanical factors, personnel science is con- 
structed in part on the theory that it is quite possible to apply to 
the management of human relations certain rational principles and 
methods of procedure. Both logic and experience provide substan- 
tial support to such a theory. The problems of labor relations most 
assuredly, as already indicated, are the result of definite causation. 
It is reasonable to assume that such causes can be ascertained and 
removed. The difficulty lies in the discovery and application of 
remedial measures. That is the function of personnel science, the 
science of human administration, which has proved conclusively 
through decades of experience that there is a right way and a 
wrong way of managing human beings. Although it is as yet in its 
infancy, the science of human engineering has registered creditable 
accomplishments, as succeeding chapters of this discussion will reveal. 

Because it has to do with human forces, the science of human 
engineering is necessarily less exact than the physical sciences, such 
as physics, chemistry, and astronomy, and has less precision than 



16 THE NATURE OF PERSONNEL MANAGEMENT 

mechanical, civil, and electrical engineering. This is because the 
phenomena with which the science of human administration deals 
are more complex than those which are treated by the physical 
sciences. It is only with the perfection of the sciences of physiol- 
ogy, psychology, and economics that the elements of a science of 
personnel management can be constructed. Already a considerable 
body of principles and methods of procedure in the handling of 
human relations in industry has been discovered and successfully 
applied. Our study reviews those principles and methods in rela- 
tion to the particular personnel problems which they are designed 
to solve. 

6. Identity of Interests in Industry. One of the principal hy- 
potheses of personnel management is that the basal interests of 
employers and employees are identical. The validity of this 
hypothesis is seriously challenged by many and completely rejected 
by not a few. In refutation of this theory it is contended that the 
history of industry proves the natural and inevitable conflict of 
interests between employers and employed. It is urged that 
employers are concerned primarily with profits, while the wage 
earners are primarily concerned with wages. The implication is 
that because the employer is interested mostly in profits he con- 
stantly seeks to reduce the cost of production, including wages, to 
the lowest possible level. On the other hand, because the worker 
is interested mostly in wages, he is concerned only about the con- 
tinuation of his job and so consciously practices limitation of output. 
In other words, the employer desires to get as much work done as 
possible for as little pay as is necessary, whereas the worker desires 
to get as much pay as possible for as little work as is necessary. 

No one familiar with industrial relations will deny the truth of 
such assertions. But this does not necessitate the admission that 
such an attitude on the part of the workers or of the employers is 
either economically sound or socially justifiable. It may be, after 
all (and this is the assumption of personnel science), that greater 
economic advantage would accrue to both parties if they would 
frankly recognize their mutual interests in efficient production, 
economic operation, profitable enterprise, and desirable standards 
of work, hours, and pay. Personnel science can have meaning and 
significance only in so far as it adheres to the hypothesis that the 
substitution of industrial cooperation for industrial conflict will 
yield greater net returns for capital and labor. 

The Desires and Aims of the Parties to Industry. A knowledge 
df the basic desires of employers and employees and of the com- 



THE NATURE OF PERSONNEL PROBLEMS 17 

munity's interest in industrial peace is a necessary condition to a 
solution of employment relations. It would be impossible, of 
course, to catalogue all the needs and desires of the immediate parties 
to industry, and perhaps even more impossible to ascertain all the 
wishes of that heterogeneous mass commonly referred to as the 
"public." Only a brief summary can be attempted here. 

1. The Needs and Desires of Employees. There is every reason 
to believe that the average wage earner desires economic security 
more than anything else which comes within the wide range of his 
needs. Economic security consists of many important assurances. 
In the first place, it comprises protection against unjust and indis- 
criminate discharge. The worker wants to be fairly certain that 
an arbitrary and dictatorial boss, suffering from chronic indigestion 
or obsessed with racial, religious, or political prejudice, will not have 
the unquestioned and unlimited power to dismiss employees for an 
insignificant cause or no cause at all. The fear of being summarily 
discharged for the slightest infraction of disciplinary rules or for 
difference of belief, opinion, or conviction not only disturbs the 
worker's peace of mind but appreciably reduces his usefulness. 

Economic security also implies freedom from the fear of sea- 
sonal and cyclical unemployment, that is, the reasonable assurance 
of steady work. Much of the purposely practiced limitation of 
output, and, hence, the failure of employees to function to the best 
of their potential abilities, is traceable to the failure of modern 
industry to stabilize production and employment. 

The worker desires not only a steady job but a steady job at 
good wages. He wants an income sufficiently large and regular to 
assure the maintenance of a decent standard of living for himself and 
his dependents. He desires, moreover, that a reasonable income 
shall be assured him in times of illness and accident; that ample 
provision shall be made for the exigencies of old age, a decent 
burial, and a measure of economic protection for his family in 
case of his death. 

Closely related to this matter of economic security is the desire 
for physical security. The normal workman desires the greatest 
possible protection against physical injury, occupational disease, 
and accidental death. It is true that many employees suffer a 
relapse into indifference with regard to the hazards of industry; 
they often become grossly careless and negligent. In the case of 
the average worker, this relapse is likely to be only temporary. 
The average workman does not remain permanently indifferent 
to safeguards of health and life. 



18 THE NATURE OF PERSONNEL MANAGEMENT 

Being human, the wage earner naturally wants a congenial and 
happy relation in his work. This means that he wants a job that 
he likes, one that he can do with the required degree of efficiency. 
It also means that he wishes an opportunity to jmpose himself 
upon his job, to develop something of his creative ability, and to 
have something to say about how the work shall be done. The 
normal workman does not enjoy having his whole individuality 
lost in the monotonous routine of the machine process or the 
deadening minuteness of repetitive operations. The fact that so 
many modern wage earners are apparently not interested in their 
jobs is not proof that under a more enlightened and more humanized 
system of labor administration they would fail to respond willingly 
and zestfully to a demand for better workmanship. 

Finally, the workers want some sort of representation in the 
councils of industry. They probably seldom think it necessary to 
have representation on boards of directors. If, however, industrial 
history has taught any lesson, it is that workers want established 
channels of communication between themselves and the manage- 
ment. This involves the right to select their own representatives 
for joint conferences with the management concerning such vital 
matters as wages, hours, conditions of employment, and dismissal. 

2. The Needs and Desires of the Employer. It is not always so 
difficult to discover what employers want as it is to ascertain what 
is in the mind of the worker. This is partly because employers are 
relatively few in number, and partly because our economic organiza- 
tion has been such as to give them greater freedom and opportunity 
to express audibly what they desire. Briefly, employers generally 
desire the greatest possible output at the least possible cost; recog- 
nition of and respect for their traditional rights and powers in the 
organization and management of their enterprises; freedom to 
develop new ideas, new processes, and new equipment, without 
interference from either labor unions or governments; sustained 
growth of their industries and businesses; and the unreserved 
cooperation of their employees in whatever program of operation is 
scheduled. 

3. The Community's Needs and Desires. Although employers 
and employees frequently evince a tendency to disregard it, the 
fact remains that the community, which includes all individuals 
in a given political unit, has a clearly defined interest in the admin- 
istration of human relations in industry. The community (the 
municipality, the state, and the nation) is vitally interested in 
the uninterrupted flow of goods and services at reasonable prices. 



THE NATURE OF PERSONNEL PROBLEMS 19 

The maintenance of industrial peace and the security of economic and 
social institutions are essential to this end. An efficient, economical, 
and peaceful industry contributes to the general prosperity. 

The community will not interest itself much in the technical 
phases of production and distribution; it is usually content to leave 
these matters to those who are competent to handle them. Unfor- 
tunately, moreover, society seldom takes a keen interest in the 
problems of human relations in industry and business until the 
peace of industry is disrupted and the public is deprived of its cus- 
tomary goods and services. At such times governments either 
intercede with proposals for conciliation or, if the community is 
suffering unduly, threaten coercion unless an early settlement is 
forthcoming. The equities or inequities of particular cases do not 
bother the community very much; it usually wants peace at any 
price, and commodities at the lowest possible price. 

The Scope of Our Study. If the foregoing discussion of the 
nature of industrial unrest and its causes is correct, it is clear that 
the problems of personnel relations fall into three categories as 
follows: (1) problems of recruitment, selection, and placement; 
which involve getting the worker and assigning him to his appro- 
priate place in the organization; (2) problems of maintenance, which 
have to do with keeping the worker in the service of the company; 
and (3) problems of joint control, which issue from the necessity of 
establishing agencies of communication between management and 
employees. 

In considering briefly the causes of conflicts in employment 
relations, it was suggested that certain forces in the development of 
modern industry and business had contributed greatly to such con- 
flicts. It will, therefore, aid in the orientation of our study of 
personnel problems and their solutions if we review the broad out- 
lines of the evolution of modern industrialism. This will help 
us specifically to see the interdependence and interrelationship of 
the present and the past. A summary of the evolution of modern 
industrialism is, consequently, presented in the succeeding chapter. 

Whatever solutions of personnel problems are forthcoming will 
necessarily have to have the sanction of the general management. 
In a relatively large number of progressive firms, the responsibility 
for discovering and applying such solutions is delegated to a 
specialized department of personnel administration, functioning, 
of course, as an integral part of the general management. Hence, 
the necessity of examining the organization and functions of the 
personnel department, as well as the basic principles and methods 



20 THE NATURE OF PERSONNEL MANAGEMENT 

of the whole science of management. To these tasks the remaining 
chapters of Part I are devoted. 

It is quite generally agreed that the successful management of 
personnel is fundamentally a matter of understanding adequately 
and guiding wisely the elements of human nature. If this be true, 
it is essential that the science of management, especially that divi- 
sion of it which deals with employment relations, shall take due 
cognizance of the human equation. This necessitates familiarity 
with inborn and acquired traits of human nature. These psycho- 
logical aspects of personnel relations are the subject matter of 
Part II. 

The problems of recruitment, selection, placement, job analysis, 
and the methods of procedure in solving them are examined in 
Part III. In Part IV, the problems and methods of personnel 
maintenance are analyzed and described. Part V considers per- 
sonnel problems in the civil service, and Part VI is devoted to a 
consideration of the problems of employee representation and the 
machinery which has been developed for joint control. 

So broad a survey of the problems of employment relations and 
the principles and methods of personnel administration as is indi- 
cated above must necessarily lead to a critical examination of the 
whole technique of management. Such an appraisal is attempted 
in part VII of our study, with which the analysis is concluded. 

Any study of the problems of personnel relations and the 
methods of their administration must proceed primarily from the 
standpoint of management. This is because the problems of pro- 
cedure in handling human relations in modern enterprise are 
essentially problems of managerial technique. To be complete, the 
analysis must attempt to interpret to the worker the difficulties of 
management, and to management the difficulties of the workers. 
It must, moreover, take cognizance of the larger social interests 
which impinge at various points upon equitable relations in industry 
and business. As suggested in the preceding pages, the economic 
organization of a country is a means to an end rather than an end 
in itself. That end is dominantly social; namely, the enrichment 
of human life through the satisfaction of ever-expanding wants and 
desires. From a social point of view, however, the achievement of 
that end through the exploitation of the workers is undesirable and, 
consequently, unjustifiable. Industry cannot be a vehicle of 
genuine social progress if its own advance is purchased at the 
expense or sacrifice of those who are so largely responsible for its 
success. 



CHAPTER II 
THE DEVELOPMENT OF LABOR RELATIONS 

The Changing Character of Employment Relations. If history 
can be said to have a social function perhaps it may be found in the 
capacity of that discipline to chart the seas of human experience 
and thus to assist humanity in avoiding the mistakes of past genera- 
tions. It is certain that the past cannot, with impunity, be dis- 
regarded in the formulation of programs of reconstruction for the 
present and the future. This is the conviction that lies behind 
a survey, albeit a very brief one, of the historical development of 
industrial relations in a book which purports to deal with problems 
of contemporary labor relations. 

Historical perspective should contribute appreciably to our 
understanding of the essentially dynamic nature of our economic 
organization, particularly that of employment relations. It 
should, moreover, enable us to perceive more clearly the intricate 
character of the forces that are responsible for economic changes. 
And if we view historical trends with any degree of impartiality, 
we shall discover evidence of the fact that despite periodical reac- 
tions there has been an advance in the general status of the wage- 
earning class, as well as in the principles and methods of labor 
administration. Significant among the lessons of the history of 
capitalism are these: that employer-employee relations are ever hi 
a state of flux; that not only have there been great changes in the 
position of the worker but also definitive progress. 

The Early Status of Labor Relations. The history of employ- 
ment relations is an interesting record of the rise of the laboring 
classes from servitude to status and from status to economic 
emancipation through freedom of contract which, although yet 
inadequate, gives evidence of increasing industrial democracy. 

Almost the first laboring class which history records was com- 
posed of slaves. Although in all early civilizations there existed 
numerous groups of handicraft workers skilled in the art of making 
interesting things of economic value, early industrial relations must 
be studied primarily in conjunction with the institution of slavery. 
This institution had its origin in military conquest. As society 

21 



22 THE NATURE OF PERSONNEL MANAGEMENT 

advanced from savagery and barbarism to civilization, sympathy 
and insight discovered the economic and social advantage of sub- 
stituting servitude for slaughter. In nearly all of the great militant 
nations of the world, the laboring class has passed through the 
stages of slavery and serfdom. Except on the grounds that even at 
its worst life is cherished by the average human, the substitution of 
servitude for death frequently has presented little to choose between 
the two. Yet this step represented a definite advance in the 
progress of the masses. 

The hieroglyphics of the tombs and temples of ancient Egypt 
bear mute testimony of the fact that its early civilizations were 
founded largely on slave labor. The records of those civilizations 
indicate, moreover, that even nonslave labor, whose skill con- 
tributed so generously to the artistic beauty of the nation's great 
monuments, was given only meager reward in kind, such as wheat, 
oil, or wine. Under such circumstances, employment relations 
were naturally predominantly autocratic, and the treatment of the 
laborers was extremely cruel. It has been appropriately observed 
that slavery was "the whip that built the pyramids, dug the canals, 
and carried through most of the monumental works which remain 
today in Egypt." 1 How intolerable were the workers 7 tasks and 
how harshly they were treated are almost self-evident to anyone 
who looks upon those great monuments and acquaints himself with 
the significant fact that they were constructed with the aid of only 
the most rudimentary instruments, mostly by the direct applica- 
tion of human energy. 

In early Greece, industry was carried on by free men, and 
the joy of creative workmanship is said to have been quite prevalent 
among master craftsmen and their apprentices. Artisans appar- 
ently took commendable pride in their individual contributions to 
the monuments that were to decorate the various communities. 
The unusual dignity that was associated with the manual arts, as 
well as the absence of chronic unemployment, were probably the 
natural result of the prevailing scarcity of skilled artisans. To 
women, children, and slaves were given the rough and menial tasks, 
although slave masons seem to have shared the work of free masons 
and to have received the same pay. 2 Economic security may have 
been responsible for the existence of a conspicuous spirit of con- 
geniality and comradeship among the workers. Prices and wages 
were regulated and standardized by custom, which precluded 

* PRICE, G. M., The Modern Factory, p. 3. 

* ZIMMEBN, A. E., The Greek Commonwealth, 1922 ed., p. 263. 



THE DEVELOPMENT OF LABOR RELATIONS 23 

organized struggles for improved standards and left the workers 
free to cultivate their creative abilities. Assured a livelihood and a 
goodly measure of security, acquisitive motives were subordinated 
to creative interest in work. Public esteem was generously bestowed 
upon the skilled craftsman, and so few were the abuses in employ- 
ment relations that public regulation was unnecessary. 1 The posi- 
tion of slave labor was, of course, quite different from that of the 
skilled, free worker. 

Work, which in early Greece was considered honorable and 
dignified, later became associated (in the minds of aristocratic 
Greeks) with that which is sordid and shameful. Employment for 
wages was regarded with contempt by the Athenian philosophers. 
Little wonder, therefore, that interest in the laborer was at a very 
low level arid that, consequently, his status, especially in the case of 
slaves, was a pitiable one. Those slaves who were not killed off by 
excessive toil were sent to premature graves by frequently recurring 
plagues and epidemics. Next to the slaves, the common laborers 
were esteemed the lowest class in the community, their life and 
work being considered ignoble and shameful. 

The Status of the Worker under Slavery. In order that we 
may appreciate the change that has taken place in the position of the 
laborer, it will be helpful to glance more closely at the institution 
of slavery. Under slavery all the rights and privileges were claimed 
by the owner-master; all the obligations rested upon the laborer. 
In slavery, as in serfdom, the laborer was born into a definite status 
of subserviency, having none of the independent rights of agreement 
which emerged later in the stage of free contract. 

The slave remained what he became under Roman law, namely, 
a chattel, the property of his master, having none of the dignity that 
attaches to a free member of the community. He could not enter 
legally into marriage. His wife and children were not his before 
the law. He had no control over his own future. As the great 
body of producers in ancient civilizations, slaves received less con- 
sideration than animals. Their hours of labor were limited only by 
physical exhaustion; their food was coarse; their shelter inadequate. 
Conservation of the slaves was inconsequential, since with each new 
conquest long lines of captives streamed through the gates of those 
ancient cities and they could be purchased at very low prices. It 
was thus more profitable to wear them out than to provide adequate 
care and sustenance for them. Legal personality could be acquired 
by slaves only by the statutory act of emancipation, and emancipa- 

Ibid., pp. 271, 272. 



24 THE NATURE OF PERSONNEL MANAGEMENT 

tion was unusual because of the common belief that slaves were pre- 
ordained by divine decree to toil that the favored few might live in 
ease and affluence. 

The slave had no interest in his work. Condemned to a life of 
ignorance, he had no incentive to the cultivation of his higher 
faculties. Enlightenment was denied him lest he learn something 
of the potential joys of freedom. The absence of education and 
training precluded his assumption of responsibilities requiring care, 
forethought, and dexterity. For him there was no stimulus to 
initiative, no spur to ambition. 

The worker under slavery remained in industrial and social 
subserviency until the forces of religion and reform, reinforced by 
the economic changes which made free labor more desirable, paved 
the way for his improvement and his ultimate liberation. By the 
end of the nineteenth century, slavery was officially abandoned in 
advanced industrial countries. It exists today only in the most 
remote and backward regions of such lands as Africa. 

The Status of the Worker in the Rural Community of the Middle 
Ages. In the course of economic evolution slavery shades off 
imperceptibly into serfdom. Even in Roman days masters of 
landed estates often found it to their advantage to convert their 
slaves into serfs and allow them to settle on the land. Gradually 
the laborer came into possession of certain legal rights and a measure 
of freedom. The status of the worker under serfdom is illustrated 
in the economic organization of Europe from the eighth to the 
eleventh centuries. 

Life in the Middle Ages was almost wholly agricultural, the title 
to the land being vested in feudal lords. Whether the lord was a 
great baron or a lesser member of the gentry, the employment rela- 
tion was practically the same everywhere under the manorial sys- 
tem. There were "free tenants" or those who were independent 
tenant farmers, and " cotters " who held only small tracts. The 
majority of the population were "villeins" or "customary tenants," 
in whom our chief interest is centered. These individuals, referred 
to also as "serfs," were quite unlike slaves in that they could neither 
be sold nor deprived of the right to cultivate the land assigned to 
their exclusive use. They were not tenant farmers in our sense of 
the term, since they paid no rent for the land which they tilled; they 
were not free laborers, because they were attached to the soil on 
which they were bound by law to stay. 

The serf could not be sold, although the soil to which he was 
inseparably attached might be transferred with him to another 



THE DEVELOPMENT OF LABOR RELATIONS 25 

lord. For his own benefit and the support of his family, he tilled 
the plot of land assigned to him and near this in the village he built 
his permanent home. Certain levies could be made upon him for 
his lord's table, but his main obligation was to give a more or less 
definite proportion of his labor time to work on his lord's demesne. 
His status as a worker was still obviously undesirable. Bound 
to the soil, he could not leave the manor to improve his life else- 
where. If he ran away, he was ordered back by the court. To 
obtain permission to remain in another town, he had to pay a 
special sum of money. He could not dispose of his cattle without 
the sanction of the law. He had no standing in the courts, and for 
redress of wrongs he had recourse only to the manorial courts which 
were presided over by his lord's representatives. Yet, serfdom 
marks a step forward in the economic position of the laborer, since 
he enjoyed certain rights over his own property and person, includ- 
ing the right to bequeath his property to his children. 

The Worker in the Urban Community of the Middle Ages. 
Employment conditions and relations in the craft guild organization 
of the urban community of the Middle Ages are of special interest to 
the student of economic evolution. The craft guilds were associa- 
tions of citizens, chartered either by the town government or by 
the crown, for the purpose of regulating and preserving a monopoly 
of their own occupations, just as the merchant guilds sought to 
regulate and control the monopoly of their own trade. Full mem- 
bership in the craft guild was reached only by artisans w r ho had 
passed through the successive stages of apprenticeship, journeyman- 
ship, and master craftsmanship. Observance of generally accepted 
standards of manufacturing was a primary duty in the guilds. 

Apprenticeship varied, but everywhere the basic ideas and pur- 
poses were similar. The employment relationship involved mutual 
obligations on the part of the master and the apprentice. Under 
the terms of the agreement, usually a signed contract between the 
master and the parents of the apprentice, the master obligated him- 
self to provide all necessary food, clothing, and lodging; to teach 
the lad the technique of the trade; to give him social advantages; 
and, in some cases, to furnish schooling and a small wage. The 
duties of the apprentice were to keep secret his master's affairs, 
obey his commands, and behave circumspectly at all times. Upon 
the completion of his term of training, which varied at different 
times from 4 to 10 years, the apprentice became a journeyman, or 
full workman. As such, he served for wages in the employ of his 
master and often saved enough money to equip a shop of his own. 



26 THE NATURE OF PERSONNEL MANAGEMENT 

Then, as a master craftsman, he was admitted to all the rights and 
privileges of the guild. 

The master did not always fulfill his obligations to the appren- 
tice, but there is abundant evidence to the effect that- employment 
relations were for the most part intimate and congenial. Since all 
industries were really household industries, carried on in the dwell- 
ings of the craftsmen, no establishments were very large, and the 
difference in the status of master, journeyman, and apprentice was 
not so pronounced as to constitute a source of friction. " Drawn 
from the same social status, united by a sense of common interest, 
masters and men in the early days of industrial development could 
toil side by side in willing cooperation, undivided by the antagonism 
of capital and labor. . . . There were no permanent classes of 
employers and employees, the one rigidly divided from the other 
by an almost impassable barrier of wealth and social status." 1 

The opportunity for economic independence which the industrial 
system of the times afforded was undoubtedly an important factor in 
the peaceful and cooperative relations that obtained in the Middle 
Ages. As an apprentice, the worker not only learned the special- 
ized knowledge and mysteries of his craft but was imbued with the 
ideals of good workmanship and high quality of product which were 
so greatly cherished by the guilds. Once he had reached the status 
of journeymanship, he looked forward eagerly to the time when he 
would cease to be a mere wage earner and would take his place 
among the masters of the guild as a fully qualified craftsman. This 
meant that he would share in the common life of the community, 
help shoulder its civic responsibilities, and enjoy its privileges and 
opportunities. 

It cannot be gainsaid that the craftsman of the Middle Ages 
enjoyed an independence not characteristic of the modern wage 
earner. The former owned his own shop and equipment and con- 
trolled the conditions and hours of employment within the limita- 
tions prescribed by the guild. The road to economic independence 
was relatively free to those who possessed sufficient industry and 
ambition to travel it. Thus a common source of industrial conflict 
was removed because industrial ownership was a real possibility for 
the worker. 

The guild made numerous rules which governed the monopoly 
of the craft and safeguarded the welfare of its members. Hours of 
labor were regulated, including such matters as prohibition of night 

1 LiP8ON, E., An Introduction to the Economic History of England, vol. I, 
pp. 288, 345. 



THE DEVELOPMENT OF LABOR RELATIONS 27 

work, as well as work on Saturday afternoons, Sundays, and other 
holy days. There was systematic inspection of goods, workshops, 
and prices. Definite rules guided the activities of mutual assist- 
ance and benevolence and controlled the conduct of journeymen 
and apprentices. 

The Passing of the Old Order. The forces of economic and 
social change function with relentless persistency; old economic and 
political systems yield to new. A significant factor in the transition 
from the established order of the Middle Ages to that which suc- 
ceeded it was the Black Death, a terrible plague which swept over 
Europe in the middle of the fourteenth century, destroying in 
England alone approximately one-half of the population. England 
consequently faced a critical situation. Economic changes were 
increasing the demand for labor and the great plague had dimin- 
ished its supply. The workers sensed their strategic position and 
refused to accept the customary rates of pay. Royal decrees 
designed to compel the laborers to accept the old conditions of 
employment were unheeded, and even the serfs took advantage of 
the labor scarcity to gain their freedom. In 1351, the first Statute 
of Laborers was enacted to force workers to accept offers of employ- 
ment at " reasonable wages or suffer the alternative of imprison- 
ment. " This measure was followed by several others, all of which 
were obviously passed in the interest of employers who alone were 
represented in parliament. Such laws could scarcely receive the 
sympathetic response of the wage earners who, although they 
suffered much in the enforcement of the statutes, did not cease to 
demand improved employment relations. 

Reconstruction of the economic and social order moved forward 
steadily, despite ruthless attempts to suppress freedom of thought 
and action designed primarily to maintain the status quo in employ- 
ment relations. Gradually, money payments were substituted for 
the old exactions until labor service by serfs was practically 
unknown. The great mass of the rural population of England by 
this time was comprised of free men from whom the shackles of serf- 
dom had fallen for all time. 

The urban civilization of Europe between the middle of the 
fifteenth and the end of the sixteenth centuries experienced similar 
changes. Whereas the worker formerly rose from apprenticeship to 
master craftsmanship, involving ownership and employer status, 
there was now a marked tendency for artisans to remain perma- 
nently in a subordinate wage-earning class. Deliberate restrictions 
imposed by the master craftsmen, coupled with a lack of capital and 



28 THE NATURE OF PERSONNEL MANAGEMENT 

initiative, increased greatly the number of dependent wage earners. 
Soon there emerged " yeomen " or "journeymen" guilds, organized 
by these workers for mutual protection against exploitation and for 
the purpose of making agreements with master craftsmen concerning 
the conditions of work and wages. Thus, the precursor of the 
modern trade union appeared. 

With the rise of nationalism and the resultant centralization of 
power in the hands of national governments, state regulation of 
labor relations was encouraged. Mercantilism, with its economic 
protectionism, made industry the protege of governments. Inci- 
dent to this whole movement was the revival of the old statutes of 
laborers in the form of the Statutes of Apprentices (England, 1563), 
which provided for compulsory labor and prescribed the conditions 
of employment. Wages, hours, and conditions of work were rigidly 
regulated, as also were the terms of apprenticeship. Freedom of 
employers and employees was greatly restrained by law. 

The force of law could not, however, stay the operation of 
economic tendencies which were ushering in a transition to a new 
industrial organization. In the period between 1603 and 1760, 
industry in England was organized chiefly on the basis of the 
"domestic system." The presence of an increasing number of 
independent artisans unwilling to conform to the exactions of guild 
membership encouraged the growth of a merchant or manufac- 
turing class, called "merchant clothiers." These capitalist mer- 
chants purchased wool or other raw materials and gave them out to 
craftsmen, paying them for their work and disposing of the product 
in domestic or foreign markets. Thus appeared a new class of 
employers who hired men for definite wages, directed the business 
enterprise, provided raw materials and much of the capital, and 
assumed charge of the sale of the product. The network of employ- 
ment relations was taking on a more intricate form, and the last 
half of the eighteenth century was destined to witness more revolu- 
tionary changes in the organization and operation of industry and 
business. 

The Birth of Capitalism. The expansion of English commerce 
and the growth of world markets in the seventeenth and eighteenth 
centuries made old methods of manufacture and transportation 
obsolete. The first half of the eighteenth century ushered in the 
beginnings of the industrial revolution, which was to sound the 
death knell of the old feudal industry. Steam and machinery were 
soon to revolutionize methods of production and distribution. The 
great inventions of the eighteenth century accelerated the move- 



THE DEVELOPMENT OF LABOR RELATIONS 29 

ment for capitalization of industry and business that had already 
appeared in embryonic form in the domestic system. The final 
outcome of this trend was the modern factory system with its 
emphasis upon machine methods, division of labor, and large-scale 
production. 

The new machinery was too expensive for the old cottage weaver 
to buy and use, and, with the invasion of machine methods in other 
fields, the craftsman found it increasingly difficult to establish his 
own enterprise. In most industries, the small master was driven 
into the wage-earning class, and the large master, who was able and 
willing to assume considerable risk and responsibility, became the 
modern capitalist employer. 

Moneyed men without previous experience in industry were 
drawn into partnership with machine spinners and weavers. The 
new industry called for close supervision of relatively large bodies of 
workers employed for regular hours, in buildings where machines 
were placed and power supplied. "Mill hands" gradually drifted 
to the centers of manufacture and became what they have remained 
ever since, namely, seekers after jobs which are owned and controlled 
by those who have acquired possession of the machinery of produc- 
tion. Thus, the modern factory with its machine process, definite 
working day, and specified wages was born, a new and dominating 
factor in economic civilization since the closing decades of the 
eighteenth century. 

The Doctrine of Economic Freedom. Contemporaneously 
with the revolutionary changes in the organization and operation 
of industry and business, there developed a no less important 
reconstruction of ideas concerning the relation of the state to 
industry. A new concept of liberty was disseminated, which was 
unalterably opposed to the old mercantilistic regulation of economic 
life that had prevailed during the preceding centuries. The 
essence of the new doctrine was that men and women should be 
accorded the greatest possible freedom in economic relations. 
Each individual was to be free to engage in those economic pursuits 
which he deemed to his own advantage, and governmental regulation 
was to be reduced to the absolute minimum compatible with public 
safety. In his Inquiry into the Nature and Causes of the Wealth of 
Nations, published in 1776, Adam Smith, premier champion of the 
new philosophy, insisted that it was a plain violation of a man's 
most sacred property to hinder him from employing his strength 
and dexterity in whatever manner he chose. Interference by the 
government was viewed as a manifest encroachment upon the 



30 THE NATURE OF PERSONNEL MANAGEMENT 

liberty of the workman and of the employer who might wish to 
hire him. "As it hinders the one from working at what he thinks 
proper, so it hinders the other from employing whom he thinks 
proper," stated the founder of modern economic science. 

The new philosophy, as expounded by the creators of modern 
economic science, was designed to prove two propositions. The 
first of these was that if left to his natural tendencies, every man 
would pursue his own interests in his own way, bringing his intelli- 
gence, energy, and capital into the freest competition with his 
fellows. This, it was contended, would redound to the maximum 
advantage for everyone. The second proposition was that certain 
natural laws govern economic relations and activities, interference 
with which always proves harmful and futile. Self-interest and 
the inexorable law of supply and demand were thus conceived as 
guiding the destinies of the nation. It was assumed that the state 
could do nothing by means of statutory regulations to improve the 
status of the wage earner and that the employer could not injure 
him. Laborers were supposed to be in the hands of a power 
(natural law) which by its very essence would secure to the workers 
all the freedom and comfort that they were capable of enjoying 
and protect their immediate and ultimate interests. Hence, to 
the state it was said, "Laissez faire, laissez passer" let things 
alone. 

This theory, known ever since as the philosophy of individual- 
ism, was destined to have a far-reaching influence upon the relations 
of employers arid employees, and to be responsible for many of the 
benefits and not a few of the ills of modern capitalism. One by 
one the old legal restrictions upon capital and labor were repealed 
and free competition became the shibboleth of the new era. 

The New Capitalism and the Relations of Capital and Labor. 
The worker's loss of ownership and control of the technical means 
of making a living, which, as a craftsman, he had suffered increas- 
ingly under the domestic system of industry, became more complete 
as modern industrialism with factory organization and large-scale ' 
operations developed. The transition from the domestic system 
to the factory system was practically accomplished when machinery 
was substituted for human power and simple hand tools in the 
manufacture of commodities. The workers, under the new regime, 
were drawn away from their homes and concentrated in factories 
and workshops owned and controlled by capitalist employers. 
Henceforth, labor power was for the most part to be sold to an 
employer who furnished materials t tools t equipment, machinery, 



THE DEVELOPMENT OF LABOR RELATIONS 31 

workplace, and supervision, and who owned and marketed the 
product of the enterprise. 

Remarkable as was the technological phase of the transition 
from the old to the new economic order, it was not effected without 
incalculable misery to the immediate generation of laborers and 
far-reaching consequences for future generations. The workers 
were not able to adapt themselves successfully to the new industry. 
Wages were sometimes higher than under the old regime, it is true, 
but they were also less regular. Fluctuations in employment 
followed upon the failure of the organizers of the new industries to 
control the wider commodity markets, which now became inter- 
national. Emergence from the laboring class was becoming 
increasingly difficult, because of the relatively large amount of 
capital and greater organizing skill required for the establishment 
and operation of plants. Human happiness, at least as far as the 
working class was concerned, was not appreciably increased. For a 
time, indeed, the masses were on the whole worse off than they had 
been under the old and less dynamic order. 

The new liberty in employment relations soon degenerated into 
license. Industrial and social ills developed pari passu with the 
new capitalism, ills which were appalling to the finer sensibilities 
of those who looked upon industry as an agency of human wel c are. 
Low wages, high prices, irregular employment, crowded conditions 
of work, unsanitary living conditions, child labor, exploitation of 
women workers, dirt, disease, filth, suffering, persecution for 
unionist activities, and general social and economic injustice con- 
spired to make the lot of the wage earner an unenviable one. 
Wealth accumulated rapidly; so did want, poverty, and misery. 
Fierce competition among producers in the commodity markets 
forced a policy of rigid economy, and wages offered an easy point 
at which to begin the pruning. 

The new capitalism continued to grow, and its expansion during 
the succeeding centuries is a story of remarkable achievement and 
recurring crises in the relations of employers and employed. From. 
England, the new industry spread to other countries of the Old 
World, to America, and finally to the Orient, where Japan at this 
moment is experiencing revolutionary developments in her indus- 
trial life. In the United States especially, the changes assumed an 
evolutionary rather than a revolutionary character. Here the 
presence of free land and abundant natural resources, coupled 
with scarcity of labor, have mitigated the evils incident to the 
new industrialism. But serious problems have followed in the 



32 THE NATURE OF PERSONNEL MANAGEMENT 

wake of the machine process, factory organization, and large-scale 
operations. 

The Revival of Social Regulation. The numerous and excessive 
abuses that have appeared under the new economic system not only 
have led to the restoration of governmental regulation of employ- 
ment conditions but have released the energies of revolutionary 
movements, which always thrive under the stimulus of poverty 
and oppression. Social control of industry and labor relations has 
expanded with increasing effectiveness. Even in the early stages 
of capitalistic development it was apparent that absolute freedom 
of contract was a concept inapplicable to a situation in which the 
parties to an agreement were neither politically nor economically 
equal. Governments were compelled, therefore, to interfere in 
order to assure something approaching equality of bargaining 
power and to safeguard their human resources. 

Not infrequently joint agreements between individual employers 
or associations of employers, on the one hand, and unions of wage 
earners, on the other, have eliminated part of the necessity for 
governmental control. Even in the absence of established agencies 
of collective bargaining, innumerable corporations in every part of 
the world where modern capitalism has developed have introduced 
constructive policies and methods of dealing with problems of 
employment relations. 



CHAPTER III 
THE NATURE AND FUNCTIONS OF MANAGEMENT 

The Complex Structure of Modern Industry and Business. The 

problems of human administration in modern industry and business 
are but one phase of an intricate network of problems which has 
emerged from the increasing complexity of our system of production 
and distribution. The industrial revolution, which originated in 
England in the early years of the eighteenth century and has con- 
tinued its irresistible march of invention and technological change 
into the twentieth, has been the most dominant factor in this grow- 
ing complexity of our capitalistic economic society. These revolu- 
tionary changes in the methods of production and distribution have 
produced an intricate industrial and business organization. More- 
over, they have been responsible for the existence of more or less 
impersonal human relations, and a conspicuous emphasis upon 
mechanization, mass production, standardization, and efficiency. 

Nowhere has the new industrialism presented more puzzling 
ramifications or evidenced greater flexibility arid vitality than in 
the United States. Among the nations of the contemporary world, 
this country stands preeminent as the exponent of the most advanced 
forms of industrial and business organization and operation. Here 
modern capitalism may be seen in its most flexible and revolutionary 
character. Old machines are quickly scrapped in favor of new ones, 
traditional production methods and procedures are readily aban- 
doned and replaced by improved ones, established types of business 
and industrial organization are displaced by different ones whenever 
management is convinced of the latter's advantages, and even the 
sacrosanct doctrine of laissez faire is consigned to the limbo of 
forgotten theories when combination promises greater returns than 
competition. 

Any realistic approach to the study of human relations must 
take cognizance of the fact that the problems which develop in 
these relations are the inevitable result of changes in the nature, 
functions, and control of the units of production and distribution. 
The function of industry is a socially constructive one ; it consists in 
the conversion of raw materials into finished products suited to 
human needs and designed to enhance the sum total of human 

33 



34 THE NATURE OF PERSONNEL MANAGEMENT 

satisfactions. Each sequence of processes in this task of trans- 
formation constitutes a branch of the manufacturing industry. 
The task of providing commodities for the satisfaction of human 
wants only begins, however, with the extraction of raw materials 
and their conversion into finished goods. The distribution of these 
goods is a gigantic task calling for the organization and operation 
of innumerable marketing and selling agencies, often referred to as 
" business functions " to distinguish them from "manufacturing 
functions. " In other words, it is the function of industry to produce 
wealth; it is the function of business to distribute it. In this com- 
plex structure of economic organization, agencies of finance, 
transportation, and communication are indispensable. The nature 
of our economic structure has been succinctly described by Prof. 
L. C. Marshall as follows: 

Modern industrial society is ... a bewildering complex, a literal maze 
of criss-crossing, interacting ranges of specialized plants, filled with spe- 
cialized workers, machines and processes, reaching out to accomplish 
thousands of purposes. And this is but the beginning. All these ranges 
are criss-crossed and served by still other ranges of specialized functional 
middlemen, like carriers, bankers, insurance companies, or advertising 
agencies. Ah 1 must, through social control and through the market, be 
welded into a balanced, want-gratifying machine, and woe is all society 
if the welding is seriously defective. 1 

This welding process, which Prof. Marshall regards as the indis- 
pensable condition of an orderly functioning of our economic society, 
is necessarily the responsibility of management. As we shall see in 
detail immediately, it is management's function to assemble, 
organize, and direct the agencies of production and distribution. 
The significance of this function is too seldom recognized and 
appreciated by employees, both within and outside of the ranks of 
union labor. 

In the United States, during the third quarter of the nineteenth 
century, the process of integration in industrial organization made 
very rapid strides, and large-scale production, with minute sub- 
division of labor and specialization, became the general character- 
istic of our industries. In this modernized organization of industry 
and business four groups of interests appeared: owners or stock- 
holders, directors, managers, and wage earners. Stockholders are 
only remotely responsible for the management of the enterprise 
and for the relations that exist between management and employees. 

1 MARSHALL, L. C., "Incentive and Output," Proceedings of the Annual 
Convention of Industrial Relations Association of America, Chicago, 1920, p. 20. 



THE NATURE AND FUNCTIONS OF MANAGEMENT 35 

The owners of shares operate through the directors whom they 
have chosen as their official representatives in the direction of the 
enterprise. In these days of widespread "proxy voting/ ' stock- 
holders exercise little authority and influence over corporation 
policies, and their interest is likely to extend no further than the 
limits of continued payment of dividends. Stockholders find it 
practically impossible to become conversant with the detailed 
workings of the factory, mill, mine, or mercantile establishment 
which they actually own and finance. Administrative functions 
are, therefore, beyond their reach. It is frequently urged that 
shareholders should assume some responsibility for the improvement 
of employment relations, but it is hardly probable that they will 
do more than assume a moral responsibility which will be exercised 
with a varying degree of effectiveness through the members of the 
directorate. Individual stockholders who have tried to influence 
employment policies have been voices crying in a wilderness of 
ineffectiveness. 

This is quite understandable when one remembers that boards 
of directors are in the last analysis responsible for the formulation of 
general corporate policies and are supposedly accountable for the 
execution of those policies through the executives whom they choose 
to operate the business. In the administration of employment 
relations, it is often true that labor policies and conditions are left 
to the general manager, but in large corporations all general policies, 
including those governing labor relations, are determined by the 
board of directors. Moreover, the dominating voices in these 
matters arc usually those of the most powerful members of the 
board, who often represent large financial interests. Seldom, if 
ever, are stockholders consulted in these affairs. 

In companies of some size, the board of directors usually 
appoints a managing director or president who possesses supreme 
administrative control and is responsible to them for the success of 
the undertaking. A single individual may be president of several 
corporations, devoting only a part of his time to the affairs of each 
one and, therefore, not familiar with all of the difficulties and details 
involved in the operation of each concern. The managing director 
or president may personally supervise the work of a number of 
managerial officers or vice-presidents, or delegate most of his func- 
tions to a general manager to whom the principal executive officers 
are responsible. 

For general administrative purposes an enterprise usually has a 
number of departments, such as production, purchasing, sales, and 



36 THE NATURE OF PERSONNEL MANAGEMENT 

finance. Progressive firms are now adding the personnel or indus- 
trial relations department. Each department is in charge of a 
head who is responsible for its successful operation. Each unit 
or plant is under the direction of a general superintendent and 
assistant superintendents, below whom are numerous minor 
executives, foremen, supervisors, and subbosses. Naturally, admin- 
istrative organization and the distribution of executive functions, 
together with the titles of executives, vary with different types of 
industries and businesses and even with different companies 
within the same industry and business. 

Management and Its Functions. {Management is that part of 
the organization which coordinates, directs, and controls the 
activities of all other parts. In a very real sense, management is 
distinctly a profession of organizing and directing men, although 
this aspect is too often unappreciated and neglected. In its most 
comprehensive meaning, management is the organization and 
coordination of materials, machines, equipment, and men with a 
view to effecting the greatest possible measure of cooperation in 
the achievement of desired ends! No matter what type of social 
and industrial system may be developed in the future, management, 
in both ijs general and special functions, will always be indispen- 
sable, [industry will not manage itself. Management is successful 
when it makes industry efficient, and efficiency is measured con- 
cretely in quantity and quality of productproduced with a minimum 
of human effort at the least possible costTl Regardless of beliefs to 
the contrary, administration cannot dispense with economy and 
efficiency. /The coordination of human nature with machinery, 
materials, and equipment, with a view to their highest cooper- 
ative efficiency, must remain the major responsibility and function 
of management^ 

Ilii itsTurictional aspects, modern management no longer tends 
to oe highly centralized in the hands of a single individual but rather 
is divided and specialized. The managerial units usually consist 
of: first, the corporate organization, which plans and finances the 
enterprise; second, the staff organization, which is concerned with 
the technical phases of the organization; third, the administrative 
organization, to which is delegated the duties connected with 
financing, auditing, accounting, and nonroutine matters; and fourth, 
the line organization, which has to do primarily with production, 
sales, and records^ 

The chief executive, who is the most prominent figure in modern 
industrial and business organization, is no longer a master mechanic 



THE NATURE AND FUNCTIONS OF MANAGEMENT 37 

and is seldom connected with the details of operation. Rather is he 
concerned with general practices and the correlation of depart- 
mental activities. Management, therefore, has become a special- 
ized profession quite apart from the technique of production, and 
the manager is a specialist in the coordination of the functional 
elements of the entire organization. The staff, instead of dictating 
rules and methods from top to bottom, builds from the bottom up. 
There is considerable solicitation of the workers' cooperation, and 
they are encouraged to submit suggestions for improvement in 
processes. Planning and performance are specialized. One depart- 
ment makes an analysis of what is to be done; another plans how it 
shall be done; another gives instructions and sets standards of 
performance, piece rates, wages, and bonuses; another inspects, 
accepts, or rejects work; and, finally, the department of personnel 
hires and fires, readjusts wages, disciplines employees, and deals 
with other problems of labor relations. Work is planned ahead 
and dispatched in writing from the central office; materials, tools, 
and instructions are supplied ahead of actual operation; men and 
women are systematically selected, trained, and placed; standards 
of work and output, as well as of pay, are determined and scheduled 
by experts; and accurate production records arc kept. The old 
general foremanship has been replaced by a functionalized fore- 
manship built upon specialization. These are the characteristics 
of modernized organization. 

Despite this seemingly complete organization of modern enter- 
prises, progress in the administration of labor relations is dis- 
appointingly slow. In this connection, it has been appropriately 
observed that "notwithstanding the high degree of perfection which 
its technique has already developed, modern industry has failed to 
secure the good will of the workers and docs not seem able to 
alleviate industrial unrest, probably because management by 
experts is a bureaucratic autocracy." 1 

Scientific Managementfit is not strange that the first attempts 
to apply the principles and meffiods of science to business organiza- 
tion and management should have been made in the mass-produc- 
tion industries of the United States^ and that, consequently, this 
country should have become known as the home of scientific 
management and mass production. 

Americans have been the real pioneers in developing the science 
of management. As early as 1886, H. R. Towne emphasized the 
economic side of engineering, and in 1891 a premium plan was 

1 WERA, EUGENE, Human Engineering, p. 42. 



38 THE NATURE OF PERSONNEL MANAGEMENT 

introduced by F. A. Halsey. The first systematic presentation of 
what is properly called "scientific management," however, took 
place in 1895, when Dr. Frederick W. Taylor read before the 
American Society of Mechanical Engineers a paper entitled, "A 
Piece Rate System : Being a Step toward the Partial Solution of the 
Labor Problem." Although the idea had been developing for 
10 or 15 years, this was the first attempt to outline a method of 
fixing piecework prices by means of splitting a job up into its 
constituent parts and determining a time allowance for each 
part. Taylor's system of work, as we shall see in detail presently, 
involved the determination of all unnecessary efforts, the elimina- 
tion of such efforts, and the reduction of human fatigue to a 
minimum. 

Taylor's experience, first as a machinist, then as a gang boss, and 
afterwards as a foreman, had impressed upon his mind the fact that 
the average industrial worker was producing far below a good day's 
work. He thus sought to provide some incentive to increased 
quantity production by devising a differential bonus system giving 
increased pay for increased effort. To aid production further, he 
sought to improve the manner of performing the tasks by the 
standardization of tools and equipment, routing and scheduling, 
special training of workers in the most scientific ways of doing a job, 
the issuance of instruction cards, proper adjustment of the man to 
the job by careful selection and placement, proper management of 
stores, and the use of special job symbols. ** 

Assuming that the interests of employers and employees are 
identical, Taylor believed that the principal object of management 
should be to "secure the maximum of prosperity of each employee." 
Such prosperity could come, he believed, only through the saving 
of energy, materials, and time; the elimination of waste; and the 
increase of the world's wealth resulting from greater productivity 
on the part of machinery and men. This is supposed to be accom- 
plished in the following ways: 

1. Separation of each operation into its elements. This is possible through 
study, observation, and experiment with unit times and motions, standardiza- 
tion of equipment and method, and definite instructions for the workers with 
regard to the best ways of performance. 

2. Determination of a definite task, difficult of attainment, but possible of 
daily continuous performance, with conservation of the physical and mental 
health of the worker. 

3. The proper routing of material and effort in accordance with determined 
standards and the provision of instruction by functionally operating and trained 
teachers. 



THE NATURE AND FUNCTIONS OF MANAGEMENT 39 

4. Determination of standards of payment, assuring a wage considerably 
above the ordinary and giving a large reward for the attainment of the task 
and a definite loss for failure. 

5. The elimination of waste material and effort, lost time, idle machinery, 
and unusable capital. 

The development of Taylor's interest in the scientific organiza- 
tion of work and the equally scientific determination of pay is 
enlightening. As a young man in Philadelphia, he had made plans 
to enter the legal profession but found the realization of this dream 
impossible because of trouble with his eyes. In 1885, at the age 
of 22 years, he obtained work in the office of the Midvale Steel 
Company, but shortly he was transferred to one of the shop depart- 
ments of the company. From the very beginning, he had evinced a 
keen interest in the organization and technique of production, 
with the result that increased responsibilities were placed upon him. 
As foreman, he later succeeded in arranging and scheduling work 
so that less time was lost and the output of the average worker was 
noticeably increased. He continued his efforts despite threats of 
harm from certain members of his work gang. His interest in 
efficiency was too deep to warrant abandonment in the face of such 
opposition. 

In the midst of revolutionary changes in the organization and 
technique of production, Taylor saw the need for scientific planning 
which involved simplification and standardization. The wastes and 
inefficiencies of industry were obvious to him. He knew that, since 
the earliest days of modern industrialism, workers had been placed 
in jobs they could not fill competently because of inadequate or 
improper training. Placed under the instruction of an old operator, 
the new employee would be taught many inaccuracies as well as 
many accuracies of operation. This was the "rule of thumb" 
method of production, which prior to the coming of scientific 
management was traditional in American industry. Under this 
system any kind of worker was placed at any kind of a job and 
trained in any kind of a way, if at all. It allowed all sorts and 
varieties of tools to be used, followed the theory that labor must be 
driven to a point of exhaustion in production, and totally disregarded 
the influence of environmental factors upon efficiency. This system 
of work was built on the assumption that all an employee needed 
was time and he would discover the best ways of performing any 
task. 

The onerous, if not impossible, duties assigned to the average 
foreman seemed to Taylor to be a principal cause of inefficiency. 



40 THE NATURE OF PERSONNEL MANAGEMENT 

The foreman was expected to be a good machinist, a rapid reader 
of blue-print drawings, and the agent responsible for planning 
work. Moreover, in most shops it was his duty to see that each 
man kept his machine clean and in good operating condition, safe- 
guard quality production and assure quantity production, regulate 
the flow of work at the desired speed, oversee timekeeping and 
rate setting, adjust wage scales, and maintain discipline. Manage- 
ment failed to recognize the utter impracticability of this type of 
foremanship; the task was almost a superhuman one. 

To escape from the shortcomings of traditional methods of 
operation, Taylor was convinced that management should assume 
at least four new responsibilities, as follows: first, develop a scientific; 
method for each element of a man's work; second, scientifically 
select, train, and direct employees; third, secure the cooperation 
of labor in the effective application of these principles; and fourth, 
provide an equal division of responsibility between workers and 
management in the attainment of desired efficiency. 

Taylor's fundamental problem at the Midvale plant was 
revealed in the questions he frequently asked himself: What should 
constitute a fair day's work? Is it what the management can drive 
the workers to perform? Or is it the minimum which workers can 
consistently get by with? A reliable answer to these central 
inquiries coidd come, obviously, only through careful studies of the 
effect of heavy labor upon individual workers. For years, Taylor 
had entertained the idea that there exists some causal relationship 
between the physical demands of a task and the length of time 
during which the worker could carry a full load in a given shift. 
Observation failed to establish any natural law governing these 
factors. Finally, Taylor enlisted the services of a competent 
mathematician, and soon something approaching a law was dis- 
covered. Almost all work, it was observed, consisted of heavy 
pulling, pushing, or lifting on the worker's arms or back. Conse- 
quently, for each given pull or push on a man's arms or back, it is 
possible for the worker to be under full load only for a certain per- 
centage of the day. This was Taylor's point of departure in his 
concrete studies of the basis of efficient production. 

During the years Taylor was connected with the Midvale Steel 
Company, somewhere between 30,000 and 50,000 individual experi- 
ments were carefully made, recorded, and analyzed. Between 
$150,000 and $200,000 was spent in this work, which involved 
such things as checking conditions of shafting; belting of machine 
speeds; shape, size, and temper of tools; requirements of jobs and 



THE NATURE AND FUNCTIONS OF MANAGEMENT 41 

the qualifications of workers. Fatigue was soon recognized as a 
determining factor in efficiency. 

A single illustration will be sufficient to indicate the nature of 
the experimentation conducted by Taylor. When the Spanish- 
American War broke out the Bethlehem Steel Company solicited 
his assistance in the solution of a problem in the loading of iron in 
the company's yards. The company had 80,000 tons of pig-iron 
to load for shipment. Speed was imperative. Taylor arrived to 
find 75 men handling an average of 12j/^ tons of pig per day. His 
task was to increase greatly the average loading speed and reduce 
the cost of handling, at the same time keeping the workers con- 
tented. After several days of observation, Taylor selected a little 
Pennsylvania Dutchman by the name of Schmidt for experimenta- 
tion in improved methods of handling and loading. Schmidt was 
slight of build, weighing only 128 pounds, but capable of doing 
hard manual labor. His pay under the old system of work was only 
$1.15 per day. Persuaded that he could make more money under 
improved methods of work, he consented to undertake the experi- 
ment. The other seventy-four workers were transferred to other 
jobs. Taylor coached Schmidt in the best and easiest way of pick- 
ing up the 92-pound pigs of iron and loading them. Rest periods 
and complete relaxation were scheduled. At the end of the first 
day Schmidt had loaded not only the old average of 12J/2 tons of 
pig, but actually 47j^ tons, and his daily earnings had increased 
from $1.15 to $1.85. Experiment had shown that for this type of 
work the laborer should be under full load for approximately only 
42 per cent of the day. Adherence to this schedule, together 
with the application of improved methods of operation were respon- 
sible for the extraordinary differences in accomplishment. 

This and numerous other experiments completed by Taylor 
yielded valuable conclusions. 1 First, the importance of proper 
timing and motion was apparent; second, the wisdom of careful 
selection and placement of workers so as to secure the right man 
for the right job was demonstrated; and, finally, the imperative 
necessity of a more equal division of work and responsibility between 
management and employees was established. 

Expansion of the Taylor System. Ever since Taylor gave great 
impetus to the discovery and application of scientific principles of 
work, scientific management has continued to expand. Although 
it is beyond the scope of our study to discuss the innumerable 

1 For details of these experiments see F, W. Taylor, Principles of Scientific 
Management. 



42 THE NATURE OF PERSONNEL MANAGEMENT 

refinements that have been made in Taylor's system by his many 
disciples, it is essential to indicate the present general lines of pro- 
cedure. Briefly stated, these are as follows: 

1. Accurate, Objective Analysis. The present-day science of 
management begins with an accurate, impartial examination and 
analysis of all types of functions and activities in the industry or 
business under observation. In the factory, this means painstaking 
study of present conditions of operation, such as the type of machin- 
ery used, its speed, kind of tools available, arrangement of the 
production or work center, the, flow of materials to and from a 
particular point, the working environment, the physical and mental 
requirements of the job, the factor of fatigue, wage scale and incen- 
tives applied, qualifications of the workers, and present and possible 
methods of performance. In the department store, it means close 
observation of all phases of the work and the present organization 
and execution of work from the time the employee reports for the 
job in the morning until she leaves for the day. Home life and 
home conditions are frequently taken into account. Research and 
experiment conducted in "an objective manner, with careful dis- 
covery, recording, classification, and analysis of factual data, are 
obviously the first steps in the attempt to formulate scientific 
principles of operation. 

2. Establishment of Standards. Research and experimentation 
are only a means to an end the establishment of scientific stand- 
ards of work and workmanship for the enhancement of productive 
efficiency. Specifications must be drawn up with regard to proper 
quality of raw materials, goods in process, and finished products. 
Other standards must be set up governing such factors as methods 
of performance, tools, time, wage rates, requirements of the task, 
and qualifications of personnel. By the aid of such standards the 
uncertainty and guesswork of the old rule-of-thumb methods are 
eliminated. 

3. Maintenance of Standards. Once proper standards have been 
established, the next step in the expanded Taylor system is to 
provide effective ways and means of maintaining these standards 
until better ones are developed. Work must be carefully planned 
and executed. Records must be kept; materials, methods, costs, 
and personnel must be periodically checked; and performance must 
be analyzed in relation to the tasks that have been set. Mechanical 
means can usually be employed in checking materials, tools, and 
machines. The maintenance of standards in labor relations, how- 
ever, is a more serious problem; the human element is a variable 



THE NATURE AND FUNCTIONS OF MANAGEMENT 43 

one, and the best standards often break down because of this fact. 
An employee may react in a certain way one day, and quite differ- 
ently on the following day. Conditions external to the plant, that 
is, in the home and community, or in the physical and psychological 
life of the worker, may upset the most carefully determined per- 
formance standards of the most astute efficiency expert. Laziness, 
indifference, antagonism, psychological inhibitions, misunder- 
standings, ignorance, or any one of innumerable factors may disturb 
the balance of labor relations. 

With regard to the labor factor in production, scientific manage- 
ment makes an earnest effort to introduce desirable conditions of 
employment. It then proceeds to make a careful selection of 
employees with a view to their proper placement in jobs which 
they are qualified by intelligence, physical capacity, training, and 
experience to fill. Having done these things, an attempt is made to 
construct rates of pay and other necessary financial incentives in 
order to encourage the most efficient performance of the task in the 
least possible time at the lowest possible expense. 

Opposition to Scientific Management. Scientific management 
has had some rough sailing, and is still met with relentless opposition 
on the part of many employers and organized and unorganized 
employees. Employers have been skeptical of the merits of the 
Taylor system, and those who are responsible for industrial adminis- 
tration have been reluctant to admit that their organization and 
methods of management are inefficient. Frequently, general 
superintendents and lesser executives have been unwilling to have 
outsiders come in and make an analysis of operating technique. 
The reorganization of an industrial or business establishment entails 
considerable expense and effort. Even though such a step gives 
promise of greater efficiency and lower operating costs, inertia or 
self-interest often precludes scientific analysis and reorganization. 
It must not be forgotten, moreover, that numerous so-called 
"efficiency systems" have been installed by self-styled experts and 
have failed miserably. For these and other reasons, many efficien*f 
engineers contend that some of the greatest opposition to scientific 
management comes from employers. 

Relatively few workers are free from suspicion of all schemes 
designed to speed up production and lower operating expenses. 
The workers' opposition to scientific management has been given 
its sharpest articulation by organized labor. This antagonism is 
based upon several grounds. It is contended that scientific manage- 
ment is a scheme to increase the differential or profits for manage- 



44 THE NATURE OF PERSONNEL MANAGEMENT 

ment and capital by increasing production, and in no way seeks to 
distribute among employees their just share of the product. Maxi- 
mum production at minimum cost, not an equitable division of 
wealth, is regarded as the principal aim of these plans. A cardinal 
objection on the part of unions is that under efficiency systems com- 
plete control of wage rates is in the hands of management, thus 
destroying the democratic control which exists under trade agree- 
ments. Joint determination of wages, hours, and conditions of 
employment is the major purpose of unionism. 

Experience has taught the workers that plans introduced under 
the name of scientific management have been used in numerous 
cases to speed up the workers excessively, often as an excuse for the 
application of sweatshop methods. Labor- is usually unalterably 
opposed to all such " stretch-out" schemes, regardless of their merit. 
Moreover, because it splits the job into numerous units, scientific 
management results in minute specialization of tasks, thus destroy- 
ing the possibility of originality and creative self-expression. This 
stifling of self-expression, which is a common characteristic of 
modern machine industries, is greatly intensified under efficiency 
systems. The workers are convinced, too, that by speeding up 
production the natural consequence is overproduction which 
results in increased unemployment. The most general source 
of labor's opposition lies, of course, in the fact that scientific man- 
agement tends to eliminate the practice of collective bargaining, 
which has proved an indispensable bulwark for the workers against 
the unfair practices of exploitative employers. 

Labor economists have often severely criticized scientific man- 
agement. They contend that the whole system rests upon two 
inadmissible assumptions, namely, that there are natural and 
immutable laws governing industry and that the interests of 
employers and employees are harmonious and identical. 1 They 
maintain that no such natural laws of production exist, because 
the human factor is a variable that cannot be reduced to scientific 
precision and human reactions cannot be predetermined. Phys- 
cal and mental factors do not respond in the same way at all 
times. Men and women are free agents, and may consciously or 
unconsciously rebel against any rigid scheme of regimentation 
in production, thus affecting output adversely. Furthermore, 
because the employer is primarily interested in profits and the 
worker in wages, the interests of the two classes are to that 
extent antagonistic rather than harmonious. 

1 See HOXIB, R. F., Trade Unionism in the United States, Chaps. XII, XIII. 



THE NATURE AND FUNCTIONS OF MANAGEMENT 45 

The validity of these objections does not concern us here, but they 
cannot be ignored in any discussion of personnel problems. For 
our purposes the significant fact is the existence of such powerful 
opposition from these several groups, particularly from employers 
and workers. Scientific management does standardize the job 
and the pay, thus tending to make unnecessary the joint determina- 
tion of wage rates and precluding collective control of performance. 
This is the real argument of unionists against the movement. 
It does uncover conspicuous deficiencies in the organization and 
operation of plants, which undoubtedly is the major reason for the 
opposition of many executives. Few students of Taylor insist that a 
rigid natural law governs production or that there are no differences 
and conflicts of interest between employers and employees. 

It cannot be gainsaid that greater precision and standardization 
arc possible through the application of scientific principles to the 
organization and management of industry and business. Although 
scientific management as conceived by Taylor and his associates 
has not been so generally applied as its exponents have hoped, the 
contribution of this movement to the development of the intelligent 
organization and performance of work is unmistakable. Its short- 
comings from the standpoint of the basic principles and methods 
of human engineering will appear as we analyze those principles 
and methods in the subsequent chapters of our study. 



CHAPTER IV 
PERSONNEL MANAGEMENT 

The Inception of Specialized Management of Personnel. Not- 
withstanding the existence of serious deficiencies in the application 
of the principles of scientific management as formulated by Taylor, 
the movement which he originated has contributed constructive 
suggestions for the development of a specialized science of adminis- 
tering employment relations. Taylor himself urged the necessity 
of developing a true science of management, introducing scientific 
methods of selection and placement, adopting systematic methods 
of employee training, and stimulating more intimate and friendly 
cooperation between management and men. 

From the standpoint of personnel science, however, Taylorism 
was inadequate because it tended to place the major emphasis upon 
the handling of materials rather than on the proper administration 
of human factors. A specialized management of personnel has, 
therefore, been developed for the primary purpose of dealing with 
these neglected human forces in industry and business, seeking 
always that degree of coordination between mechanical and human 
elements which will not only result in the desired degree of efficiency 
but also assure the prevalence of equity in the whole scheme of 
employment relations. To the attainment of these ends, proper 
coordination of mechanical and human factors is indispensable. 

It must not be implied that specialized administration of per- 
sonnel relations had its origin in Taylor's principles of scientific 
management. Although it has come into prominence and achieved 
its greatest successes only within the last quarter of a century, 
scientific administration of labor relations, as distinguished from 
scientific management in the broader sense, had its beginning in 
numerous welfare schemes, which for an extended period of time 
had claimed the attention of humanitarian employers. Welfare 
work has been defined as comprising any plans and activities 
"designed to improve the social and intellectual status of employees, 
over and above the wages paid, which are not an absolutely neces- 
sary obligation of the industry nor required by law." 1 The sub- 

1 "Welfare Work for Employees in Industrial Establishments in the United 
States," United States Bureau of Labor Statistics, Bulletin 250, 1919, p. 8. 

46 



PERSONNEL MANAGEMENT 47 

stance of welfare work was present in the economic organization 
of the Middle Ages, in which the masters provided for the well- 
being of their workmen in a manner strikingly modern. In the 
guild system, for example, provisions were made for the adjustment 
of grievances, the care of sick employees, the training and education 
of apprentices, the determination of hpurs of work and workdays, 
and the adjustment of wages. In addition, there were established 
mutual benefit funds from which relief was paid in cases of poverty, 
sickness, old age, and unemployment. 

In the wake of the industrial revolution, as we have seen, came 
the loss of intimate contacts between employer and employee. A 
differentiation of interests developed which soon affected adversely 
the relations of capital and labor. But even in the beginning of 
modern machine industry and factory life some employers realized 
the value of improving conditions of work. Foremost among such 
employers was Robert Owen, the originator of enlightened labor 
management, as he was of so many other progressive movements. 
In 1800, he took over the management or "government," as he 
called it, of New Lanark, a cotton mill built near Glasgow in 1785 
and employing some 1,800 to 2,000 persons, including about 500 
children. His policy was paternalistic and inquisitorial, just as 
most welfare plans tend to become even today. No phase of the 
worker's mode of life escaped inspection and regulation. 

One of Owen's first acts was to enlarge and rebuild houses in the 
village. Every tenant was required to clean his house once a week 
and to whitewash it once a year at his own expense. The company 
enlarged the village water supply and cleaned the streets. It main- 
tained its own police force. A voluntary company store was 
established. Owen bought at wholesale and resold at moderate 
profits to his employees, thereby underselling his competitors. 
He substituted goods of high quality for those of low quality. 
Thrift was encouraged; drunkenness and vice were extirpated. 
A fund for the relief of the sick, the aged, and the injured was sub- 
scribed to by all the workmen, who were required to set apart one- 
sixtieth of their wages for these purposes. The wage scale, however, 
was considered low. Voluntary thrift was encouraged partly by 
the company store and partly by the organization of a savings bank. 

Owen accepted the new machine industry as a necessary agency 
in the creation of greater material well-being, but he recognized that 
the evils which issued from the factory system must be eradicated in 
the interest of general social welfare. An equitable division of 
wealth and the reconstruction of the social environment so as to 



48 THE NATURE OF PERSONNEL MANAGEMENT 

make possible good character seemed to him to be indispensable 
conditions of a satisfactory community. Hence, the establishment, 
in 1809, of the "New Institute for the Formation of Character/' 
with provision for lectures, dances, libraries, and other means of 
education and recreation, supported from profits earned by the 
company store. This broader social program was regarded as a 
supplement to, and not a substitute for, the improvement of 
employment conditions and relations. For example, in 1816, hours 
of labor were reduced from the prevailing 14 hours a day to 12 hours, 
with \Y hours off for meals. Owen found his welfare schemes very 
profitable. 

Welfare work in the nineteenth century was not confined to the 
establishments managed by Robert Owen. Other philanthropic 
employers in England and on the continent established mutual 
benefit funds, introduced profit-sharing plans, and did various other 
things to alleviate the position of their employees. 1 In the course 
of the century the movement expanded greatly in the industrial 
countries of Europe, numerous schemes being introduced to help 
wage earners meet the exigencies of sickness, accident, old age, 
and unemployment. 

In the United States, welfare work dates from the beginning 
of manufactures, being quite prominent in the textile factories of 
Lowell, Mass., in the early thirties. Even an operatives' magazine 
was introduced in 1837 under the title of "Lowell Offering." 
Most of these welfare plans were highly paternalistic and often 
proved a shield for otherwise undesirable conditions of employment. 
Moreover, the schemes appear to have been the result of a desire 
to attract much-needed workers, rather than an attempt to intro- 
duce equitable treatment of personnel. The American movement, 
therefore, was hardly comparable to the English and continental 
European development, which may explain the opposition to it 
on the part of the wage earners. Nevertheless, experiments con- 
tinued throughout the nineteenth century and have been even more 
widespread in the twentieth. 

The economic exigencies of the World War (1914-1918) served to 
accentuate sharply the need for enlightened personnel procedure 
and to stimulate a sincere interest in functionalized administration 
of personnel relations. Those responsible for the management of 
industry and business had long since been accustomed to the idea 
of functionalization, because in numerous enterprises specialized 

1 See "Paper, Its Applications and Novelties/' in Dodd'a Curiosities of 
Industry, p. 3. 



PERSONNEL MANAGEMENT 49 

departments had been created to handle production, advertising, 
selling, purchasing, financing, and accounting. An almost unprece- 
dented scarcity of labor and an extraordinary increase in the volume 
of production, both by-products of the conflict in Europe, were 
sufficient to enhance the value of the wage earner. A rapid rise 
in the cost of living and the customary failure of wages to keep pace 
with prices greatly stimulated industrial unrest. Labor's strategic 
position was revealed in the readiness with which strikes were 
called and in the spread of limitation of output. Employers were 
in a receptive mood for improved methods of handling personnel, 
and the federal government was quick to cooperate in encouraging 
the introduction of special courses of training for personnel man- 
agers. The expansion of specialized personnel administration dur- 
ing the war and immediately after was quite phenomenal. 

The business recession which appeared in 1921 and reappeared 
in more pronounced form in 1929 has had an adverse influence on 
the movement for progressive labor management. A revival of the 
vital character of the movement inevitably takes place under 
the auspicious circumstances of returning economic expansion, as 
the status of the movement during recent years clearly reveals. 

Personnel departments are now found in practically every line of 
industry, commerce, and finance, as well as in such fields as educa- 
tion and civil service. The organizations in which the specialized 
administration of employment relations exists in the United States 
vary in size from 50 to 200,000, or more, employees, from single- 
unit firms to multiple-unit corporations. The soundness of intelli- 
gent, equitable management of labor has been demonstrated 
convincingly. Specialized departments of employment relations are 
now an integral part of the larger structure of all forms of 
administration. 

The Indispensability of Specialized Administration of Labor 
Relations. If one examines the general position of present day 
business, one soon discovers the reasons why specialized administra- 
tion of human relations is imperative. As the industrial structure 
becomes more complex, relations between management and 
employees become more impersonalized. The old intimacy which 
characterizes the small enterprise disappears as the organization 
changes from the single enterprise and the partnership to the 
intricate structure of the large corporation, often integrated into a 
vast holding company. In the larger industrial and business units, 
delegation of managerial authority and responsibility is inevitable, so 
that those who own the enterprise and those who direct it seldom, 



50 THE NATURE OF PERSONNEL MANAGEMENT 

if ever, come into personal contact with its technological and human 
problems. 

Increasing division of labor and minute specialization of tasks 
tend to make jobs and occupations tedious and monotonous. 
Repetitious performance of the same detailed operation becomes, 
except for the subnormal worker, a source of severe nervous strain. 
Employees become restive, with resultant diminution of good will 
and efficiency. 

Coordination of technological and human factors is now quite 
generally recognized as essential to the sustained operation of pro- 
ductive enterprise. The canons of science have been successfully 
applied to the mechanical forces of production. Standardization, 
simplification and planning are the cherished by-products of 
scientific management. It is not a far cry from the mechanical to 
the human forces in business, and the deepening insight into the 
science of human psychology has hastened the application of 
intelligence to employment relations. Machines do not operate 
themselves, and improved technological processes avail little in the 
absence of spontaneous and willing cooperation of the operatives. 

Application of scientific method to human factors in industry and 
business soon reveals the incompleteness of the traditional form of 
organization. Production, finance, sales, and purchasing depart- 
ments have long been recognized as necessary specialized agencies 
in the conduct of business enterprise. With the discovery of the 
causal connection between a cooperative working force, on the 
one hand, and efficiency and profits, on the other, functionalized 
departments of personnel administration are seen to be indispensable. 

Through their collective efforts, implemented in the trade union, 
the workers have for over a century and a half directed the attention 
of society to undesirable conditions of employment, inadequate wage 
scales, excessive hours of work, and autocratic methods of labor 
administration existing under modern industrialism. Partly to 
meet the demands of organized employees, and partly to obtain 
public good will, employers often find it necessary to introduce 
improved standards of employment, wages, and hours and to 
develop progressive policies and methods of personnel management. 

As already suggested, the inauguration of specialized personnel 
procedure is necessary to supplement the scientific organization 
and direction of the material forces of production and distribution. 
In the interest of peace, good will, and general efficiency in the 
enterprise, management often finds it imperative to evolve a special 
technique for the administration of human relations. The develop- 



PERSONNEL MANAGEMENT 51 

ment of such a technique does not presuppose the relinquishment of 
the contributions of the old scientific management, but rather 
supplements them through the proper direction of personnel. 

The Motivation of Specialized Personnel Control. Like its 
progenitor, welfare work, personnel administration has been sub- 
jected to severe criticism, particularly by those who see in such 
administration an obstruction to the introduction of independent 
unionism and by those who fear it may retard the growth of revolu- 
tionary activity. The principal criticism against what employers, 
at least, regard as improved personnel procedure, is that its basic 
motivation is selfish and reactionary. As a matter of fact, the 
motives that have led to the inauguration of rather complete per- 
sonnel programs are varied in nature and in importance. 

Some employers, relatively few in number, have been actuated 
by a religious and philanthropic motive. Recognizing the doctrine 
of the universal fatherhood of God and the brotherhood of man, 
they have expressed great confidence in the applicability of the 
golden rule to industry and business. As a general practice, how- 
ever, men do not allow their religious scruples to interfere with 
doubtful business practices, including inequitable treatment of 
personnel or the limitation of output. 

In similarly rare instances, one finds that employers have intro- 
duced improved labor administration because of a desire to make 
industry " socially minded/' a medium of developing constructive 
citizenship and increasing the material welfare of the community. 
The satisfaction which comes from general social prestige and social 
approval often prompts humanitarian labor policies, and sometimes 
they are prompted by an earnest desire to promote industrial and 
social progress. This was true of the Owenite movement. But on 
the whole, the inception of progressive personnel programs does not 
issue from such commendable social consciousness. 

What, for the want of a better term, may be Called a " psycho- 
philosophical" reason motivates some employers in the adoption 
of rather comprehensive schemes of personnel administration. 
Such employers have a desire, often amounting to an obsession, to 
prevent revolutionary changes in the ownership and control of 
industry and business. Employers who fear the invasion of 
independent unionism and collective bargaining hope by personnel 
procedures to forestall any attempts to interfere with their preroga- 
tives to run their enterprises as they see fit. Others have deeply 
imbedded fears of the growth of socialism and communism with 
their revolutionary programs for the destruction of capitalism. 



52 THE NATURE OF PERSONNEL MANAGEMENT 

Personnel administration is regarded as an encouragement of con- 
servative attitudes and tendencies. 

Of all the motives to personnel activities, the economic one is the 
most powerful and general. This is the desire to give more in order 
to get more. It is generous because generosity results in friendly 
employment relations, the absence of serious conflicts, and the kind 
of cooperation that conduces to profitable enterprise. There are 
few cases in which this motive does not play a major part. The 
presence of the economic motive does not necessarily imply the 
absence of a sincere desire for economic justice. Nor should one 
conclude that there is anything illegitimate about such a motivation, 
since ours is essentially an acquisitive society. This is not a defense 
of the practice, which is all too common, of substituting charity 
for justice and sham democracy for genuine democracy in the con- 
trol of employment relations. 

The Requisites of Successful Personnel Management. Ameri- 
can experience indicates that personnel practices succeed only where 
and when there is adherence to certain well-defined principles of 
conduct. In the first place, as just intimated, personnel activities 
which are designed as substitutes for equitable wages, effective 
collective bargaining, and other fundamentals of sound labor policies 
will not succeed permanently. Wage earners are quick to sense 
selfish motives and hypocrisy in methods of administration. Unless 
a company's standards of wages, hours, and conditions conform to 
those prevailing in the community, the workers' reception of 
ambitious personnel activities will not be a cordial one. 

A second principle of procedure is that there should be a pre- 
liminary educational program to acquaint the employees with the 
fundamental aims and methods of the proposed personnel organiza- 
tion. Workers are inclined to fear and suspect practices of manage- 
ment which they do not understand, especially when such practices 
have to do with employment relations. 

No less important than the preceding conditions is the require- 
ment of direct participation of the working force in the formulation 
and execution of the personnel program. Some system of joint 
representation is indispensable to continued confidence in any plan 
which involves the interest and welfare of the employees. Workers' 
participation in the creation and administration of labor policies 
invariably precludes misunderstanding and friction. 

Finally, the attainment and maintenance of favorable labor 
relations are dependent upon the establishment of personnel 
Departments and their functions as a permanent phase of generaS 



PERSONNEL MANAGEMENT 53 

management. The most disastrous tendency in personnel pro- 
cedure has been overexpansion of the personnel program in periods 
of business prosperity when work was abundant and labor scarce, 
followed by abnormal retrenchment when business depression set 
in. Curtailment of expenditures for personnel activities is a 
necessary and inevitable concomitant of business recession. The 
danger lies in excessive pruning of the personnel department's 
budget in comparison with allocations for other departments. 
Employees soon lose confidence in personnel activities which prove 
to be more or less transitory. 

The Need for a Functionalized Personnel Department. 
Standardization of mechanical appliances, plant design, and produc- 
tion methods makes it possible for practically all progressive and 
adequately financed business establishments to obtain equal 
advantages in equipment and processing. Prevention of plagiariz- 
ation of patented processes is difficult. Even in the purchase 
of raw materials the differential advantage which one corporation 
enjoys over another is comparatively slight, except where extremely 
large-scale buying is possible. It would seem, therefore, that 
scientific administration of human relations offers the most fruitful 
source of differential advantage; that, in the last analysis, economy 
and efficiency must rest upon the intelligent organization and direc- 
tion of human forces. Such organization and direction are tasks 
requiring the attention of a specialized department of labor 
relations. 

Preliminary Steps in the Establishment of a Personnel Depart- 
ment. -American experience with personnel administration is a 
checkered one; the wreckage of personnel departments is rather 
thickly strewn along the pathway of our recent industrial history. 
Many have failed after an auspicious beginning. For the most 
part, the failures have been due to the neglect of certain fundamental 
principles of procedure. These principles may be summarized 
briefly as follows: 

1. Management must be convinced that there is a definite and permanent 
need for a specialized department of industrial relations and that tangible 
benefits will accrue from such an addition to the structure of management. 

2. The point of view of management in inaugurating a special depart- 
ment of personnel relations must be businesslike and not paternalistic or 
philanthropic. 

3. The policy of the personnel department, as well as its probable future 
development, must be clearly denned to executives and employees, upon whose 
cooperation the successful realization of the personnel program necessarily 
depends. 



54 THE NATURE OF PERSONNEL MANAGEMENT 

4. A competent personnel manager must be selected, who in turn should be 
made responsible for the building up of an efficient staff in the personnel 
department. 

5. It is the part of wisdom to refrain from excessive praise of the 
new organization and its procedures until actual achievements warrant 
commendation. 

6. The conduct of the new department of personnel must always be frank; 
secrecy and duplicity have no place in such a department. 

Because personnel activities are permeated with human interest 
and prejudice, the inauguration of a personnel department, in 
many instances, is attended with greater difficulties than the 
development of almost any other phase of management. The 
reasons for this are numerous. However frankly men may acknowl- 
edge their limitations in dealing with material and mechanical 
forces of production, few are willing to admit any inability to 
judge and manage their fellow men. All executives pride them- 
selves on their ability to understand and control human nature. 
Even when employers or managers are honest enough to grant that 
they cannot expertly control the working force, they are seldom 
willing to admit the need for a specialized department of human 
relations. This is because they fear the loss of authority and power 
which may follow the recruitment of new employees through a 
specialized employment department. 

Minor executives are unlikely to ascribe to the personnel depart- 
ment any better basis for recruiting, placing, and handling employ- 
ees than they themselves possess. So far as training is concerned, 
they insist that they are much better equipped to train men than is 
any specialized training division of the employment department. 

Not infrequently the introduction of a specialized department of 
industrial relations is retarded, if not prevented, by the extremely 
conservative attitude of certain members of boards of directors, who 
either regard such a procedure as too radical a departure from 
established practice or fear the potential consequences if workers' 
rights are clearly recognized. 

Essential Nature of the Personnel Job. Fundamentally, the 
personnel job consists in giving sufficient attention to human forces 
in industry to assure their mobilization for effective operation. 
Industry and business are viewed as the joint enterprise of capital 
and labor; mutual advantage rather than exploitation is sought, 
and spontaneous cooperation is desired. 

Responsibility for the personnel job rests primarily upon 
management, that is, upon the shoulders of the chief executive and 
his assistants. The task of the personnel manager is basically an 



PERSONNEL M, 5 

advisory one; he is chief counsellor to executives in all matters 
touching human relations. Since the human factor is the main 
agency through which all the processes of production are carried 
out, the head executive does not release his control over personnel 
policies and functions. He merely delegates his responsibility in 
these matters to a specialist who knows the industry, is familiar 
with the problems of the working forces as well as with the problems 
of management, understands clearly the objectives of the com- 
pany's program of labor relations, and appreciates the needs and 
desires of the workers. The personnel job, then, is not separable 
from other jobs, since problems of personnel exist in every depart- 
ment and employees are linked up with every phase of the enterprise. 

The Meaning of Functionalization in Personnel Management. 
As set forth in our discussion of the science of management (Chap. 
Ill), the general executive is essentially a correlator. It is his 
business to define the general aims and purposes of the enterprise 
and to harmonize with these all lesser and incidental policies. His 
task of coordination requires the assistance of specialists who con- 
centrate their attention and effort upon particular phases of the 
enterprise, and who at his request provide him with standards and 
more effective methods of advancing the organization. The func- 
tion of staff departments is thus clearly recognized in technical 
matters. When the chief executive desires a plant, he depends 
upon an architect to design the buildings that will meet his needs; 
when he desires a new product, the research or designing department 
is at his command. 

This principle of staff organization and service is now being 
carried over into the field of human administration, because there is 
general recognition of the indispensability of competent, coopera- 
tive employees. Specialization of function is, however, just as 
essential in the control of human relations as it is in the manipulation 
of mechanical and material forces. One of the important results 
of scientific management was that it called attention to the absurdly 
wide range of functions which the average foreman was obliged to 
perform. He was expected to hire men, set their wage rates, and 
discharge them; find work for men and machines from hour to hour; 
recommend equipment for the shop; keep machines and equipment 
in repair; give an offhand opinion as to when an order of work 
would be completed; determine the cost of stock maintenance; 
preserve discipline; and furnish the general office with records as 
required. The Jack-of-all-trades was master of none, with the 
usua.1 result inefficiency. Proof of this was found in machinery 



56 THE NATURE OF PERSONNEL MANAGEMENT 

operated at low percentage of capacity; time lost in hunting tools; 
waste of stock; delayed deliveries; and inefficient, discontented 
workers, who frequently aired their grievances in strikes and other 
forceful ways. 

The remedy for such a situation was found in functionalization. 
This means simply that groups of related duties are put in charge of 
staff or service departments, such as the stockroom, the planning 
room, the tool room, and the designing department, an engineer in 
charge of repairs, and an estimating department. In conformity 
with this conception of functional division of labor and responsi- 
bility, there has been introduced in many enterprises a department 
in charge of supervision and general administration of employment 
relations. Thus, the foreman is relieved of many onerous duties. 
Where this change has been made, he is no longer a "bouncer," 
no longer sells jobs, practices nepotism, or holds his favorites in 
"soft" positions. Where there is a specialized department of 
employment relations, he does not have the easy device of covering 
up his own incompetence by firing a man but must suggest a 
transfer, which may prove that the worker can be efficient in another 
shop or department under different supervision. Moreover, he 
gets a more even run of dependable employees from the employ- 
ment division than he himself could provide. He is now free to 
devote himself to the technical requirements of production, whether 
the plant is making a commodity or providing a service. 

Line and Staff Organization in Personnel Management. The 
development of functionalization has led to considerable reorganiza- 
tion of the structure of industry and business, with the result that 
the administration of personnel has been greatly modified. Under 
the old military type of organization, it will be remembered, 
authority flowed directly from the chief executive or head to various 
subbosses or minor executives, and through them to the employees 
of the rank and file. Such a type of organization, often referred to 
as the "straight-line" form, makes possible direct managerial 
control, is definite and exact in matters of authority and discipline, 
and economizes expenses of administration. It achieves its great- 
est efficiency in the small enterprise. From the point of view of 
scientific management of labor relations, this type of organization 
has many disadvantages. It imposes far too numerous and varied 
duties and responsibilities upon foremen, gang bosses, branch 
managers, office supervisors, and other minor executives. Tech- 
nical specialists are required to do many things for which they have 
not the inclination, time, preparation, and ability. Lacking expert 



PERSONNEL MANAGEMENT 57 

advisers on these matters, they are forced to rely on their own 
resources, with a consequent loss of time and effort. 

Because it is fundamentally a service division, the personnel 
department cannot operate successfully as a line organization. It 
must function for, with, and through all the other departments. 
Structurally, the personnel department can be, and often is, inde- 
pendent of other major departments. Functionally, however, the 
activities of this department cannot be isolated or departmen- 
talized. The administration of employment relations is a general 
function, the successful execution of which must depend upon the 
cooperation of all persons to whom executive or supervisory duties 
and responsibilities are delegated. Such procedure is fundamental 
to the formulation of sound personnel policies and the coordination 
of all personnel practices. The personnel department, therefore, 
is best organized on a line-and-staff basis and should be a major 
staff department. Like all other departments under this type 
of industrial and business organization, the personnel department 
has in its principal positions skilled specialists. 

In companies in which the personnel department is a major 
staff organization, its responsibilities and authority are definite 
and fixed. Instructions and directions issued by it are accepted 
and observed by other departments which are coordinate with it, 
exactly as though the orders had come directly from the chief 
executive or any other person in authority and control. Only 
where the authority of the personnel department is thus regarded 
as supreme in its field is there likely to be successful administration 
of industrial relations. 

The staff control by specialists which prevails under a line-and- 
staff organization does not, of course, dispense with the direct 
control of line members. The direct "line" flow of authority from 
the chief executive downwards still obtains. In other words, no 
department is or can be left a law unto itself to exist as a separate 
entity. Such independence would preclude necessary coordination. 
The personnel department is no exception to this rule. The 
manager of employment relations is responsible to the chief execu- 
tive alone, which makes the department coordinate in respon- 
sibility with all other departments. The line of authority is 
unmistakably clear and definite. The personnel manager, as a 
staff expert, is adviser to the chief executive on all matters involv- 
ing employment relations. The successful accomplishment of his 
staff functions, however, necessarily brings the head of the personnel 
department into daily contact with minor executives, whose routine 



58 THE NATURE OF PERSONNEL MANAGEMENT 

duties involve the management of rank and file upon whom th< 
ultimate responsibility for the application of personnel policies 
must rest. Within the personnel department itself there are, oj 
course, many line functions to be administered by the manager oJ 
industrial relations. 

Coordination with Other Staff Departments. Coordination ol 
the activities of the personnel department with other functionalizec 
departments, such as finance, sales, traffic, office, production 
planning, and purchasing, is an indispensable condition of effective 
operation. It is from these that the personnel department mus1 
often obtain data essential to the formulation and application of its 
policies. For example, it would be impossible for the personne 
department, functioning independently, to determine practica 
policies governing wages, hours, and safeguards against accidents 
These policies must be related definitely to the facts and experi- 
ences of production. Communication between all departments 
and the department of personnel relations, therefore, must be freely 
maintained, and mutual confidence and cooperation established 
With regard to this matter, it has been appropriately observed thai 
the personnel department "must work helpfully and understand- 
ingly with the other departments, without pride or arrogance 
But it must work unceasingly with clear vision toward the goal oi 
making its distinct contribution to the company's prosperity 
through improved human relationships which it may help tc 
develop." 1 

It is obviously not sufficient that the personnel department 
shall be a model of system and efficiency within the confines of its 
departmental organization. It must equip and train itself to a 
point where it becomes the logical agency for handling relations 
between management and men. The execution of such a respon- 
sibility must, however, necessarily be implemented through the 
heads of operating departments. That is, the personnel depart- 
ment is essentially a counseling and service department, upor 
which reliance is placed by management for cooperation with al 
other departments in the general program of production. 

Such interdepartmental cooperation can be assured. In a 
number of organizations, there is a weekly conference of department 
heads for the purpose of considering common problems and inter- 
related activities. Such conferences, moreover, are often convened 

1 HOPKINS, E. M., "A Fimctionalized Employment-Department as i 
Factor in Industrial Efficiency," The Annals of the American Academy q 
Political and Social Science, vol. 65, May, 1916, p. 75. 



PERSONNEL MANAGEMENT 59 

at the convenience of the principal executive, or in times of emer- 
gency. In these and other ways, the unity and balance of operating 
policies are assured, friction is reduced to a minimum and a basis 
of sustained efficiency is established. 

Correlation of Policy. The specific benefits which accrue from 
a closer coordination of the functions and activities of the personnel 
department with those of other departments are not difficult to 
apprehend if one keeps clearly in mind the functional relationships 
which necessarily exist among the several departments of the 
modern business enterprise. Coordination is frequently effected 
along such lines as the following: 

1. Labor and Production Policies. The necessary relationship 
that obtains between production and personnel policies is obvious 
to the most casual observer of industrial enterprise. Scientifically 
planned, scheduled, and routed work is fundamental to sound 
personnel practice. Broken, interrupted, and irregular operations 
are conducive to discontent. This is particularly true of piece- 
workers who, if they must wait for materials or are required to 
perform operations not included in the specifications governing their 
tasks, immediately become impatient, are incensed with the manage- 
ment, and sometimes leave the service of the company. A poorly 
planned production department invariably reflects its make-up and 
operation in low-grade, indifferent craftsmanship and a high rate 
of labor turnover. This is a serious matter in the case of highly 
skilled operatives who are not easily replaced. 

To avoid friction, methods of wage payment and other impor- 
tant elements in the relation of the worker to the job are often 
determined jointly by the production and personnel departments. 
The amount and form of payment, the manner of arriving at final 
rates, the procedure of adjusting rates to meet changed conditions 
of production, and other incidentals in the remuneration of workers 
are considered by both departments. Additional lines of coordi- 
nation include the making of time, motion, and fatigue studies; 
safety work; job analysis and job description; selection and place- 
ment of personnel; technical training programs; promotion and 
transfer; discipline and discharge. 

2. Labor and Sales Policies. The interdependence of the per- 
sonnel and the sales departments may not be very apparent, yet 
close observation will reveal an intimate relationship between them. 
The reduction or elimination of wastes resulting from seasonal 
variations in production and employment is, to a large extent, a 
responsibility of the sales manager. Unnecessary losses of time 
and considerable misdirection of energy resuty from attempts to 



60 THE NATURE OF PERSONNEL MANAGEMENT 

adjust production to the fickle whims and trends of the commodity 
market. Stability of production and employment is more effec- 
tively advanced by the continuance of staple products to which the 
market invariably readjusts itself. 

There are common sense and good business judgment behind 
the tendency to have sales policies jointly determined and con- 
trolled by all departments. Experience shows that the sales 
department frequently dictates to other departments. The whole 
organization is likely to be plunged into a frenzy or lulled into a 
paralysis of production by the spasmodic activities of the sales 
force. Anarchy of production and unstable employment may 
result. On the other hand, the adjustment of sales policies and 
activities to the arbitrary determination of the production depart- 
ment, which may not be sensitive to the changing requirements of 
the market, is not good business. The wisest course lies in the 
direction of coordination. When sales policies are agreed upon by 
interdepartmental conferences, correlation of production and sales 
is made possible, with the consequent avoidance of rush orders, 
irregular employment, excessive overtime, and increased production 
costs. Regularized employment depends upon regularized produc- 
tion, and this in turn hinges on consistent development of the 
market. 

3. Labor and Purchasing Policies. Efficient, sustained produc- 
tion depends as much upon the competent purchasing of raw 
materials and equipment as upon intelligent planning, scheduling 
and routing. Inadequate equipment, worn-out machinery, anti- 
quated methods of production, poorly lighted offices and workshops, 
lack of supplies, arid scarcity of good tools contribute to discontent 
and poor workmanship. Frequently the personnel department is 
able to assist in the avoidance of these conditions by close coopera- 
tion with the purchasing department. The personnel department 
is in a position to present statistical evidence of the influence of a 
well-defined purchasing policy upon smooth production and indus- 
trial good will. On the other hand, the purchasing department 
can obtain helpful assistance from the personnel department in 
promoting careful and economical use of materials, machines, 
equipment, and tools. Such cooperation reduces production costs, 
which are the basic factor in meeting the price requirements of the 
market, thus assuring steady sales and stabilized employment. 

4. Labor and Financial Policies. The condition of the balance 
sheet of any corporation greatly affects the interests of the employ- 
ees, since it reflects the probability of continued employment. On 



PERSONNEL MANAGEMENT 61 

the other hand, the condition of the balance sheet itself depends in no 
small degree upon the employees and the whole administration of 
the labor force. The failure of important concerns to pay regular 
dividends and the resultant demotion of their securities from Class 
A to Class C rating is often attributable to unwise labor policies. 
A financial department which is inefficiently managed and financial 
policies that are determined without reference to labor costs 
invariably result in curtailed operations and reduced employment. 
Unsuccessful personnel policies, mismanagement or poor manage- 
ment of labor, on the other hand, just as surely result in adverse 
effects upon credit and finance. This is important in view of the 
fact that investment bankers invariably take cognizance of labor 
relations in determining loans. Industrial good will is quite 
generally acknowledged to be a banking asset. 

Modern wage earners are taking an increasingly keen interest 
in the earnings and net profits of corporations. This is especially 
true of unionized workers. The research and statistical depart- 
ments of progressive trade unions keep a watchful eye on the 
balance sheets and financial operations of firms in which their 
membership is vitally interested. Such data are essential in the 
intelligent consideration of wage adjustments and other improve- 
ments in labor standards. Similarly, corporations find it necessary 
often to present facts concerning their financial status in order to 
create confidence, forestall unreasonable demands by employees, 
and prove the necessity of wage reductions. 

Watered stock, large undivided surpluses, high rates of deprecia- 
tion, large dividends, and high executive salaries, all of which have 
periodically been revealed in Congressional investigations and, 
consequently, given the widest possible publicity, have a marked 
influence on labor's attitude. In view of such conditions, the 
workers regard as quite legitimate their demands for a living or a 
saving wage and other improvements in conditions of employment. 
Unfortunately, workers obtain secondhand their information about 
corporation finance, not infrequently from the soapbox orator or 
the radical section of the labor press. A simple, accurate statement 
of financial affairs given by the company itself to employees through 
the personnel department should prove an effective answer to the 
misstatements and exaggerated presentations of the professional 
agitator. A sobering effect also results from the policy of giving 
workers accurate information about the amounts of outstanding 
stock, unpaid bonds, size of replacement and depreciation funds, 
reserves, surplus, and methods of computing fixed charges and net 



62 THE NATURE OF PERSONNEL MANAGEMENT 

income. Such procedure is equally valuable for profit-sharing and 
nonprofit-sharing firms. 

The Status of the Personnel Department. Personnel depart- 
ments vary greatly in authority, responsibility, and efficiency; 
they range from the many which are nothing more than hiring or 
labor clearance offices, interested only in supplying workers for 
jobs, to the relatively few which have well-rounded programs of a 
highly developed character and a correspondingly developed 
organization with clearly defined functions. The organization and 
functions outlined in the chart on the opposite page are represen- 
tative of the best, and are not typical of the average personnel 
department. 

Maturity and experience are constantly bringing modifications 
or abandonment of old principles and practices and the addition 
of new ones ; each company gradually evolves the type of personnel 
organization and procedure which best meets its own needs. Flexi- 
bility is an indispensable condition of sound development. There 
is no such thing as a perfect personnel organization and there can 
be none, because there is no finality in the principles and methods 
that have to do with the human equation in industry and business. 

The General Functions of the Personnel Department. It must 
constantly be borne in mind that the personnel department is 
merely the medium through which the general management func- 
tions in the administration of human relations. Decisions involving 
labor relations flow from the chief executive through this depart- 
ment to the heads of the various other departments, who in turn 
pass them on to their subordinate operating officials for application. 
In the final analysis, these operating officials are the real personnel 
managers. On this point, an experienced executive appropriately 
observes : 

However, though personnel experts are invaluable as staff advisers, it 
is the line executives who are the real captains of our human management 
problems. If the concept of modern and scientific human organization is 
to become woven into the scheme of our business life, it must become 
a matter of first importance in the minds of these executives. 
It must not be regarded by them as a fad or fancy, or as frills, but as a 
major part of their job. These executives are, after all, the influential 
factors in determining the day in and day out routine of factory opera- 
tions and in conducting our financial, sales, and office departments. They 
must be entirely convinced ("sold" if you will) of the importance of these 
matters before real progress can be made on a large scale. 1 

I LBWISOHN, SAM A., " Purpose, Progress, Plans," Presidential Address, 
American Management Association, New York, 1025, p. 3. 



PERSONNEL MANAGEMENT 63 

The principal duty of the personnel director is to see that the 
labor policies formulated by those higher in command are properly 
executed by line executives, and to give advice and assistance 
whenever these are needed. The chief responsibility of the per- 
sonnel department as a whole is to coordinate all policies and 
activities affecting employment relations. Viewed more specifi- 
cally, personnel departments undertake to do the following things: 

1. Formulate principles of procedure and develop a technique for the 
proper recruitment, selection, and placement of employees. 

2. Collect information concerning the requirements of every job in the 
organization and make the specifications that are required for intelligent 
placement of personnel in those jobs. 

3. Draw up a set of rules and practices for the promotion of health, com- 
fort, and safety of employees. 

4. Stimulate interest in the job and the enterprise. 

5. Cultivate good will through joint conferences between management's 
representatives and the representatives of the employees concerning physical 
conditions of work, hours, and wages. 

6. Encourage division of ownership through stock distribution among 
employees of the company. 

7. Develop adequate opportunities and facilities for executive and 
employee training. 

8. Construct systems of transfer and promotion. 

9. Create machinery for the hearing and adjustment of grievances. 

10. Formulate a general code of rules for shop conduct and discipline, and 
provide a plan of handling dismissals which will assure justice and safeguard the 
interests of the company and the men. 

The successful execution of such duties in a large concern requires 
a personnel department which is itself organized with several func- 
tional divisions. A complete personnel department has the follow- 
ing divisions: (1) employment; (2) health, safety, and sanitation; (3) 
education, training, and research; (4) welfare; and (5) joint representa- 
tion. Both structurally and functionally, several of these divisions 
are often integrated under one head, but in some cases further 
decentralization prevails than is indicated here. The organization 
and responsibilities of any personnel department must necessarily 
be adapted to the needs of the particular enterprise. 

Interrelation of Functional Divisions. In actual operation, the 
administrative divisions of the personnel department are not so 
sharply denned or differentiated as our outline might imply. 
Usually, there are fewer divisions and a consequent combination 
of functions. Specialization is, however, very necessary in the 
larger enterprises. Those in charge of employment are not often 
successful in dealing with problems of health, sanitation, safety, and 



64 THE NATURE OF PERSONNEL MANAGEMENT 

education. These are special fields requiring specially trained 
experts. 

Cooperation within the department of industrial relations is as 
necessary as cooperation between the various departments. The 
employment division has a primary interest in job analysis and 
specifications, wage scales and incentive systems, cost of living data, 
and trends in personnel practice, which are provided by the research 
division. The health, sanitation, and safety division is vitally 
concerned with the type of men and women who are recruited for 
jobs, since sickness and accident rates depend upon the physical 
and mental qualities of employees and always bear a definite relation 
to the personal factor. The work of the education, training, and 
research division is of great importance to all other divisions, because 
labor turnover, health, safety, and wage rates have a direct relation- 
ship to the degree of intelligence, information, and skill among 
employees. The joint representation division seeks through con- 
ference to effect an amicable adjustment of grievances and to formu- 
late constructive programs of expansion in personnel practice. 
Thus, its work is to facilitate the operations of all other divisions. 

Whether or not a company is large enough to warrant a compre- 
hensive organization in charge of personnel, the functional activities 
are nonetheless essential to the maintenance of that unity and 
balance which determine profitable enterprise. Where the struc- 
ture of the personnel department is an ambitious one, there is need 
of the same unity and balance among the functional divisions as are 
expected to characterize the operation of the enterprise as a whole. 



CHAPTER V 
THE RISE OF A NEW PROFESSION 

Reasons for the Employment of Special Personnel Executives. 

In the preceding chapter, it was suggested that one of the principal 
sources of industrial grievances is the practice of entrusting the 
administration of employment relations to production executives 
who also are responsible for manufacturing operations, output, and 
costs. It was also suggested that there is an increasing tendency for 
corporations to employ a general officer whose sole responsibility is 
the supervision of all policies governing the relations of the manage- 
ment to employees, and who in progressive firms is accorded a posi- 
tion of dignity equivalent to that enjoyed by other staff experts. 
There are a number of reasons for this tendency to employ specialists 
in personnel relations. 

1. The Desire to Assure Adequate Attention to Personnel. Experi- 
ence has proved repeatedly that whenever the administration of 
human relations is assigned to executives in charge of production, 
neglect of such relations is almost inevitable. This is not due to 
any malice aforethought on the part of executives. In every 
plant production executives are concerned primarily with problems 
of output arid cost. Administration of labor is incidental to these 
matters. This is not strange, since such executives are held 
responsible for uninterrupted output and the greatest possible 
production at the lowest possible cost. Production schedules must, 
therefore, be maintained. When emergencies arise which threaten 
interruption or shutdown, manufacturing processes must receive 
immediate attention. Because labor costs and other expenses go 
on just the same, anything which interferes with production sched- 
ules must be attended to promptly. 

It is quite natural that production executives should prefer to 
devote their time and energy to the improvement of machinery, 
methods, and processes of production because these will have an 
immediate and tangible influence upon larger output and lower 
costs, for which due credit will be received. No such immediate 
and definite results appear to accrue from improvement in employ- 
ment relation where the beneficial effects upon output and costs 
are less tangible, even if tii^>" are no less real. 



66 THE NATURE OF PERSONNEL MANAGEMENT 

This concentration of attention upon problems of processing, 
scheduling, routing, and other technical matters identified with 
production, to the almost total exclusion of thought to problems of 
human relations, invariably has a negative influence on the reaction 
of the workers to the general program of production. * Workmen 
seldom respond generously to demands for increased output, elimi- 
nation of waste, and reduction of cost, if management manifests 
no concern in the well-being of employees. Only reciprocity of 
good will can assure the degree of co-operation that is essential 
to efficient operation. The cultivation of good will requires time 
and thoughtful attention; it is one of the major responsibilities of 
the personnel executive. 

2. The Necessity of Safeguarding Long-run Interests of Manage- 
ment and Employees. Because immediate efficiency is the primary 
concern of production executives, they frequently condone, if not 
actually initiate, practices which in the long run tend to have a 
demoralizing effect upon employment relations. For example, 
piece rates are cut in order to secure an immediate saving in produc- 
tion costs, although experience everywhere indicates that such a step 
invariably destroys incentive, curtails output, or increases costs. 
Again, the old " drive" methods are employed because they tend 
to an immediate speeding up of production, although they always 
result in a rapid exhaustion and fatigue of the working forces, kill 
the spirit of spontaneous cooperation, and make it extremely 
difficult to recruit a desirable type of new employees. Low wages 
are introduced, although it is a known fact that decent wage stand- 
ards are more conducive to sustained output. 

The personnel manager's vision extends beyond immediate 
results; he perceives the ultimate adverse effects of inequitable 
treatment of the rank and file. That is why he opposes undesirable 
changes in employment standards and constantly strives to inaugu- 
rate desirable ones. For instance, when an inconsequential change 
is made in the technique of a job merely as a smoke screen for a 
radical reduction in the piece rate or time wage, the personnel 
manager who is worthy of his profession frankly points out the 
negative results that invariably attend such a dishonest policy. 

3. The Need for a Balanced Emphasis. Each industrial and busi- 
ness unit of any considerable size is a complex network of specialized 
functions, and the judgments and decisions of those in managerial 
positions are determined by their specific interests. Sales manager, 
purchasing agent, auditor, advertising manager, comptroller, pro- 
duction manager, department head, chief engineer, the sub-boss, 



THE RISE OF A NEW PROFESSION 67 

each has an exaggerated conception of the value and superiority 
of his own job. Consequently, each executive is often quite unable 
or unwilling to judge fairly and appreciate fully the importance of 
the other fellow's task. The smooth and effective operation of any 
enterprise requires that there shall be a balanced emphasis of inter- 
ests and objectives. This means that the functions of each depart- 
ment shall receive due but not exaggerated recognition, and that 
human as well as material and mechanical factors shall receive 
proper attention. The encouragement of a balanced emphasis is 
among the many duties of the personnel manager. 

4. The Desirability of Centralized Control of Human Relations. 
Sad experiences have demonstrated to many employers the desira- 
bility and wisdom of centralized control of industrial relations. 
Acceptable labor standards do not create themselves; their formula- 
tion and application require education and experience of a special 
kind. The specialist in personnel administration is familiar with 
progressive labor policies and practices throughout the country. 
It is his business to educate factory managers, foremen, and sub- 
bosses in the successful ways of managing men. This means that 
he must be authorized to scrutinize the methods which these execu- 
tives adopt in handling employees and be free to suggest, wherever 
necessary, improved ways and means. Decentralized control of 
labor standards is responsible for the inconsistencies and inequities 
which so often cause friction. The remedy lies in integration of 
authority and power in the hands of the personnel manager. 

5. The Need for Interpretation of the Workers' Point of View. 
Management's ignorance of the psychology of the wage-earning class 
is notorious. The average employer in an industrial dispute mani- 
fests an appalling ignorance of the basic philosophy and psychologi- 
cal motivation behind the labor movement. His idea of the radical 
implications of unionism is usually a gross misconception; he sees 
red and revolution in every strike and boycott and obstinately 
refuses to examine dispassionately the possible causes of discontent. 
His conscience is invariably eased by his readiness to attribute all 
unrest among his employees to the activities of the " outside 
agitator." His is an attitude of " Management can do no wrong." 
Not only does he fail to understand the philosophy and psychology 
of the working class, but he underestimates their general intelligence 
and the intelligence of their leaders. So unfamiliar is he with the 
deeper motives and aspirations of his employees that he fails to 
comprehend why welfare work and benevolent paternalism do not 
suffice to make them content and efficient. In this particular, he 



68 THE NATURE OF PERSONNEL MANAGEMENT 

forgets, if he ever knew, that what the wage earner wants is not 
charity but justice. Conscious of their shortcomings in these 
several particulars, many employers have added to their general 
staff a personnel executive whose duty it is to interpret to major 
and minor executives the larger implications of the labor movement 
and the developments in the field of personnel management. 

6. The Necessity for Eliminating Old Prejudices and Fallacies. 
Employers and the executives who represent them in the administra- 
tion of an enterprise often have antiquated notions of plant disci- 
pline. No one familiar with the operation of an industrial or busi- 
ness establishment will deny the necessity for discipline. On the 
other hand, few impartial observers will admit the wisdom and 
justice of the disciplinary tactics of the old-fashioned workshop in 
which force, autocracy, and threat of discharge are relied upon to 
make petty regulations effective. 

In the old-fashioned establishment, it is a common practice to 
uphold the decisions of foremen and other minor executives in 
matters of discipline regardless of the possible existence of error in 
judgment on the part of such subordinate officials. Unjust dis- 
charge is frequently the lot of the wage earner in such an establish- 
ment; he has less opportunity to present his case to impartial 
adjudication than did the serf of the Middle Ages. With the addi- 
tion of a personnel manager skilled in the art of handling grievances 
and complaints, the channel between management and workers is 
opened and decisions of minor executives are subject to review. 

7. The Need for Developing Personnel Technique. Successful 
maintenance of the desired unity and balance in employment rela- 
tions impinges at one point or another upon the development of 
adequate knowledge and effective methods. Systematic records, 
specialized forms, and definite types of organization and procedure 
have been evolved by various corporations in an effort to guarantee 
effective administration of personnel. Personnel managers them- 
selves in special conferences are constantly comparing principles 
and methods of procedure. Experiences are exchanged and agencies 
for mutual assistance are created. The application of this special 
technique to particular establishments requires the constant atten- 
tion of a specialist in personnel management. 

The Personnel Manager's Difficult Task. The responsibilities 
and duties of the personnel manager, many of which have been 
suggested in the foregoing pages, are onerous and difficult. This is 
due partly to the fact that he is dealing with the least amenable of 
all the forces in production, namely, human beings, and partly to 



THE RISE OF A NEW PROFESSION 69 

the necessity of recognizing so many different points of view and 
such widely divergent interests. 

1. Relation to the Management. The personnel manager's pri- 
mary obligation and responsibility is to management. He is 
employed, paid, and controlled by the employer, who often looks 
upon the inauguration of a personnel department as an interesting, 
but doubtful, experiment. Because the results of improved per- 
sonnel procedure so often are difficult to measure in terms of dollars 
and cents, it is not an easy matter to demonstrate quickly the 
advantages of new methods of labor administration. Nevertheless, 
management expects from the personnel director fairly conclusive 
evidence of the economic benefits that accrue from the department's 
activities. Innovations in personnel policies and practices generally 
originate with the personnel officer, but they must have the sanction 
of the chief executive. The continuance and expansion of the 
personnel program must also depend upon the approval of the chief 
executive. For these reasons, one of the principal duties of the 
personnel manager is to establish and maintain cooperative relation- 
ships with the head of the enterprise. 

2. Relation to Operating Officials. In the earlier pages of our 
discussion it has been pointed out more than once that the practical 
application of personnel policies is in the last analysis the responsi- 
bility of operating officials. Without the cooperation of the men 
who occupy supervisory positions in the establishment, the successful 
operation of the personnel department would be impossible. It is 
for this reason that every personnel director finds it imperative to 
create harmonious relationships with the superintendent, depart- 
ment heads, foremen, and lesser executives who contact the working 
force day by day. Once the personnel department loses the con- 
fidence or fails to obtain the cooperation of major and minor execu- 
tives its days of effective work are numbered. 

3. Relation to the Rank and File. The chief executive and operat- 
ing officials may approve particular policies of personnel administra- 
tion, and yet the application of such policies may fail because of 
opposition on the part of the rank and file of employees. Coopera- 
tive relationships with the wage earners are not always easy to 
establish, for the simple reason that workers are frequently suspicious 
of the whole personnel program. Not infrequently the personnel 
director faces the necessity of convincing employees that he is not 
a "company man" devising subtle schemes to make them more 
efficient, tractable, and acquiescent, but rather that he is a genuine 
representative of human interests in the plant and, as such, is the 



70 THE NATURE OF PERSONNEL MANAGEMENT 

guardian of the physical, mental, economic, and social well-being 
of the workers. 

Wage earners have to be reassured by the test of experience 
that the personnel manager is an honest, sincere, and faithful 
advocate of fair treatment. Duplicity quickly destroys* the con- 
fidence that is essential to cooperation. One of the most promising 
personnel departments we have known was short-lived because 
the workers discovered that the personnel manager had deliberately 
lied to them with regard to the financial status of the company. 
The personnel director had made a strong plea for the acceptance 
of a 10 per cent reduction in wages, explaining that unless this was 
done the company could not afford to operate with the full force 
and many men would have to be laid off. The facts were that the 
company had amassed a large surplus in the more prosperous years, 
did not face the exigency of curtailing production to a very marked 
extent, and only recently had declared an extra dividend on its 
common stock and increased the salaries of executives 25 per cent. 
The wage earners who had agreed to the reduction in their remu- 
neration naturally resented such misrepresentation of the true 
situation of the company. 

4. Relation to the Community. Corporations are finding it 
increasingly necessary to establish a public relations department for 
the express purpose of enlisting the good will of the community. 
No phase of industrial management is used more successfully for 
this purpose than the administration of employment relations. A 
company known by precept, policy, and practice to deal justly and 
liberally with its workers is assured of an unusual amount of com- 
munity good will. A great many corporations regularly run 
feature advertisements in the daily newspapers describing their 
personnel policies and practices, especially those involving wages, 
promotion, profit sharing, employee stock ownership, and mutual 
benefit plans. 

At the outbreak of a strike or the initiation of a lockout, the 
first thing many large corporations now do is to try to capture 
public sympathy through newspaper advertising setting forth their 
ade of the controversy and their general labor policies. Both in 
periods of strife and during periods of peaceful relations, personnel 
managers are called upon to address various bodies in the com- 
munity concerning personnel activities. Moreover, when unsani- 
tary and immoral conditions in the community constitute a 
degenerating influence on the working force, it is often the duty of 



THE RISE OF A NEW PROFESSION 71 

the personnel director to represent the company in the campaign 
for a cleaner and better community. 

The Status of the Personnel Manager. In the United States, 
as in other countries, the official status of the personnel director 
varies considerably. It is still true that the head of a typical 
personnel department finds his authority confined to employment, 
welfare work, safety, sanitation, medical service, and recommenda- 
tion for transfer and promotion. He has little or no authority 
with regard to other vital matters of employment relations, such 
as the formulation of policies governing wage rates, the handling of 
employees by foremen, hours of labor, grievances, discipline, and 
discharge. He is consulted in these matters only as a subordinate 
adviser to major executives who make the decision, that is, the plant 
superintendent, general manager, president, executive vice-presi- 
dent in charge of personnel, or some other official. 

Recent years have witnessed considerable modification in policy 
with regard to the authority and power of the personnel director, 
especially in the larger companies. The tendency is to enlarge the 
scope of his authority and power and to hold him absolutely respon- 
sible for what happens. That is, his authority and power are 
becoming commensurate with his responsibility, as they should be. 
Merely conferring the title of personnel manager on a clerk does not 
make him one; nor is genuine personnel administration confined 
to the hiring and placing of employees. In progressive firms, the 
personnel manager takes an increasingly important part in the 
determination of changes in wage rates, wage increases and decreases, 
hours of labor, conditions of employment, training programs, and 
the adjustment of grievances. 

As a result of this larger conception of the dignity and impor- 
tance of the personnel manager's place in the scheme of industrial 
and business administration, he has in many large companies been 
given rank on a parity with that of other major executives. The 
wisdom of such a step is not difficult to perceive. A high rank and 
corresponding authority and prestige are necessary in order to 
secure for him freedom from the binding influence of traditional 
points of view in the administration of human relations. When 
he speaks and acts with authority, there is less difficulty in inaugu- 
rating new policies and practices. This larger freedom enables 
him to express his independent judgment, without which his value to 
the enterprise is inconsequential. Far from lacking adequate author- 
ity for these purposes, some personnel managers have been much too 



72 THE NATURE OF PERSONNEL MANAGEMENT 

timid to use the power already granted them. More than one chief 
executive has complained that the personnel department has not 
functioned effectively because of the hesitancy of the director in 
taking the initiative in introducing improved practices. 

The elevation in the status of the director of personnel is bound 
to have the effect of attracting to this new profession individuals 
with real capacity for administering human relations. No person 
possessing the broad qualities requisite for the organizing and direct- 
ing of a personnel department will accept a position having the 
limited authority and responsibility of a clerkship. Only a glance 
at the personnel departments of our most prominent corporations 
will indicate clearly how rank, prestige, and adequate salary 
tend to attract men of real ability. The most successful per- 
sonnel departments are invariably those which have a high degree 
of authority and independence, because these departments have 
drawn to themselves men of ability and personality. Such men 
command the confidence of both management and wage earners. 

Qualifications of the Personnel Director. From what has been 
said throughout the preceding pages concerning the duties and 
requirements of the personnel job it should be clear that such a 
position in firms of relatively large size can be filled successfully 
only by men of extraordinary ability. Even in enterprises of 
relatively small size, the individual responsible for the administra- 
tion of personnel relations must possess unusual capacity, much 
more than is possessed by the superannuated employee who some- 
times is assigned to the task. The management of men is much 
more difficult than the management of machines and materials. 
The latter are inanimate and passive, responding definitely to the 
will and wishes of their manipulators; the former are animate and 
often impulsive, responding indefinitely and uncertainly to the 
orders of their superiors. It requires skill to handle machines; it 
takes ingenuity to administer men successfully. If as much time 
and money were spent in the selection of a personnel director and 
the formulation of the personnel program as are expended in the 
development of so-called efficiency schemes and employment of 
efficiency experts, the difficulties and wastes of industry and busi- 
ness would be reduced appreciably. 

The director of labor relations must be a person with a wide 
range of qualities and abilities. The very nature of his job demands 
a sympathetic appreciation of the point of view and desires of the 
wage earners and a clear perception of the objectives of manage- 
ment. Practical wisdom and tact are indispensable if he is to 



THE RISE OF A NEW PROFESSION 73 

succeed in establishing and maintaining friendly relations between 
employer and employee. On the other hand, situations frequently 
develop which require positive treatment and which must be met 
with firmness and determination. Indecision and timidity fail at 
such times, hence the need for a strong personality. 

The application of new personnel policies and practices, which 
invariably involve a radical departure from traditional methods of 
handling men. always necessitates a good measure of common 
sense. Common sense is practical sense; it implies the ability to 
perceive the limits beyond which certain principles of procedure 
and certain methods of application cannot be pushed without 
negative results. In other words, common sense is a sense of reality. 
The possession of common sense does not preclude the possession 
of idealism. In the administration of human relations, idealism 
is a first essential; indeed, it is largely responsible for the growth and 
expansion of the best programs of labor management. Common 
sense, or a sense of reality, simply prescribes the boundaries beyond 
which idealistic experimentation must not be permitted to go. The 
refined balancing of the ideal and the practical in personnel man- 
agement is a test of good judgment. 

Breadth of vision and courage are necessary to the proper 
development of a personnel program. Breadth of vision entails 
the ability to look beyond the immediate present into the future; 
it involves the power to conceive new principles and now practices 
which promise to improve the relations between employer and 
employees. Vision of this nature is original and creative, projecting 
itself into the sphere of the unknown and the untried. Like the 
workmen he is expected to help manage, the director of personnel 
should have a desire for creative craftsmanship. But it is insuffi- 
cient to conceive and propose new principles and new methods; one 
must also have the courage to insist upon what appear to be sound 
lines of experimentation, to defend the practices that are founded 
on equity, and oppose practices which are inequitable. Opposition 
to traditional policies and methods that are inadequate and unjust 
is not an easy matter, nor is the advocacy of untried ways of man- 
agement a simple task. Both require more than an ordinary quan- 
tum of courage. 

The causes of waste, inefficiency, and friction are not often very 
obvious. Their discovery invariably demands unusual industry 
and resourcefulness. Such a task requires not only a working 
knowledge of the technical phases of business but also the ability 
to trace results to their causal or conditioning factors. The po 



74 THE NATURE OF PERSONNEL MANAGEMENT 

session of an analytical mind is, therefore, very essential in the 
administration of a personnel department. 

The successful personnel director must be a good judge of men. 
One is never quite sure what businessmen mean when they say they 
are good judges of men and know thoroughly how to handle them. 
Supposedly, one is a good judge of men when one has the ability to 
perceive quickly their motives, penetrate their purposes, comprehend 
clearly their capacities and inabilities, and analyze their reactions. 
In other words, good judgment of men implies the ability to appre- 
hend almost instantly what men can or cannot do, as well as what 
they probably will or will not do. As often used, the phrase "good 
judge of men" suggests an unusual capacity to detect at a glance 
moral, physical, and psychological traits. Most individuals have an 
abnormal optimism concerning their abilities to judge their fellows. 
There is reason to believe that such abilities are less the result of 
heredity than they are of acquired experience. 

It is almost inconceivable that anyone can succeed in adminis- 
tering human relations unless he is unusually approachable. 
Approachableness means simply that one's personality and manner 
are such as to dispel fear and invite confidence. What is commonly 
referred to as a cold, icy personality has no place in the personnel 
office; it never succeeds there. 

To the foregoing qualifications of the successful director of 
personnel, one must add others, such as a sense of humor, a goodly 
measure of patience, more than average intelligence, broad educa- 
tion, and considerable experience in dealing with people. And last, 
but by no means least, he must be interested in all problems of 
human relations. 



PART II 
PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 



CHAPTER VI 
PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

A Basic Psychological Truth. The central fact which must be 
remembered in any study of personnel management is that both 
employers and employees are human beings, with all the potentiality 
for desirable arid undesirable behavior which that quality of 
humanity implies. Those who manage, like those who are managed, 
do not check their psychological equipment at the entrance to the 
factory, mill, mine, workshop, or schoolroom. In taking up the 
daily routine of employment, men and women do not escape from 
the psychophysical traits that determine their behavior patterns 
both inside and outside the office or workshop. Men and women 
remain on their jobs what they are away from their jobs just 
men and women. This is a simple psychological truth, but it is 
one that is quite generally forgotten or disregarded by those who are 
responsible for the administration of human relations in industry, 
business, finance, education, and public service. 

It cannot be emphasized too often that the management of any 
enterprise is essentially the management of human beings in their 
relation to jobs and to other human beings. The smooth, orderly, 
and efficient functioning of this network of relationships is dependent 
upon a complex equipment of inborn and acquired traits which 
through the process of individual growth have been woven into the 
so-called "pattern of behavior." Abundant experience supports 
the conclusion that the limiting factor in the success or failure of 
any enterprise is human nature. 

The Meaning of Human Nature. Owing largely t6 the failure 
of the various schools of psychologists to agree, the term " human 
nature " is not a clearly definable one. 1 To the average person, 
the term still designates certain tendencies to activity which 
are instinctive rather than acquired. This conception results 
from a general tendency to separate the psychological self from the 
social self, and to attribute to the self or soul, as it is often called, 
certain formal or natural powers as distinguished from artificial 
or acquired traits of behavior. The natural, inborn self, is 

1 See DBWET, JOHN, "Human Nature," Encyclopaedia of the Social Sciences, 
vol. 7, pp, 531-537. 

77 



78 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

identified with such characteristics as reflexes and instincts; whereas 
the artificial, acquired self, is associated with such powers as reason 
and habit. 

Many think that original nature is formless and empty, hence 
capable of being molded completely by external circumstances. 
Human nature thus conceived is a by-product of environmental 
forces. Education and environment consequently are visualized 
as the agencies which create the human self. Euthenists and 
environmentalists generally are the active proponents of this point 
of view. 

Psychologists quite generally incline to the belief that human 
nature cannot be properly conceived or defined in terms of the 
constitution of individuals, either native or acquired. Rather must 
human nature be conceived as a group of human traits which are 
developed and have significance only in and through institutional 
life with which the organism is surrounded. As revealed in the 
individual, human nature is only a potentiality; it becomes real 
and meaningful through the medium of cultural institutions, such 
as language, religion, law, the state, and the arts of life, which form 
the content of objective mind and will "The supposition that 
there is such a thing as a purely native original constitution of 
man which can be distinguished from everything acquired and 
learned cannot be justified by appeal to the facts/' says Prof. 
Dewey. 1 Such a conception of human nature, he argues, represents 
a " static cross-section" of man and ignores the factor of growth and 
development of human beings; it is a " snapshot at birth," which 
ignores past history in the uterus and all subsequent modifications. 
Biologically all growth is modification, and the conception of 
human nature as a fixed and enumerable set of tendencies is merely 
a convenient intellectual device. 2 As we shall see later, it is a 
necessary and helpful tool in analyzing the industrial significance 
of human traits. Acquired characteristics may and often do 
become so spontaneously a part of the self as to constitute for all 
essential purposes native equipment. Moreover, a glance back over 
a long biological evolution indicates that what now appears to be 
original and native is the result of a long process of organic growth. 3 
Human nature thus appears as a composite of inborn and acquired 
characteristics which have become so closely interwoven as to be 
almost inseparable. 



., p. 533. 

a See HOCKING, W. E., Human Nature and Its Remaking, pp. 49Jf. 
DBWBY, op. cit,, p. 533. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 79 

The normal human organism reveals a dynamic and unfolding 
self. This being true, a valid conception of human nature is that 
which represents it as "growing from within generating normally 
and spontaneously ways of acting arid of responding to situations 
which are implicit in the fact of being human and being alive." 1 
Sensory, emotional, and reflective powers are a part of the human 
equipment. Internal impulses and external forces unite to produce 
the unfolding self. The will to live and to be thus issues from a 
complexity of drives which are responsible for the making and the 
remaking of human nature. Life for the individual organism is a 
continuous series of adaptations and readaptations, the ever 
insistent choice of activities amidst perplexing and conflicting 
alternatives. Reflexes, instincts, emotions, habits, and stimulus 
situations are among the propulsive forces that mold human 
behavior. Human nature, then, is merely a convenient term for 
designating "the totality of motives, numerous, contradictory, and 
often mutually exclusive in action, which constitute the electric 
current so to speak, which charges the human being with aliveness 
and continuing action." 2 

Original and Acquired Traits. Although it may not be scien- 
tifically accurate to divide human nature categorically into innate 
and acquired traits, it is a convenient practical device in approach- 
ing the problems of personnel management. "Practically, how- 
ever, with reference to the possibility of control," says Prof. 
Dewey, "the distinction between the native and the acquired is 
important." 3 

Human behavior ranges from the simple reflexes of the physical 
organism, so pronounced in childhood, to the elaborate modes oi 
conduct rationally determined, which characterize the normal 
adult. Between these two extremes, the behavior of the individual 
varies considerably in the degree of reasoned responses and con- 
sciously initiated activity. From the simple reflex actions to the 
complex forms of conduct, spontaneous responses in the presence 
of particular stimulus situations issue as the so-called "unlearned 
ways" of the individual organism. Each organism responds to 
certain stimuli in a manner which suggests hereditary predisposi- 
tion. These hereditary traits reflexes, instincts, proclivities to 
certain types of activity constitute what is often referred to as the 
"original self," the "first nature." 

1 TEAD, OBDWAY, Human Nature and Management, p. 13. 

2 Ibid., p. 15. 

8 DEWEY, op. cit., p. 533. 



80 PSYCHOLOGICAL AKPECTK OP LAHOR RELATIONS 

Whatever its degree of independence in relation to specific 
stimuli, this native stock of impulses is the common heritage and 
universal identification of the race. Each individual has these 
inherited dispositions the same original fears, angers, loves, desires, 
and hates. Life for the human race, as for other higher mammals 
that evidence a bent for discretion and self-direction, is largely 
determined by these more or less instinctive urges. "These native 
proclivities alone make anything worth while/' says Prof. Veblen, 
"and out of their working emerge not only the purpose and efficiency 
of life, but its substantial pleasures and pains as well." 1 The social 
and economic importance of these innate drives to action has been 
stated completely thus: 

The behavior of man in the family, in business, in the state, in religion, 
and in every other affair of life is rooted in his unlearned, original equip- 
ment of instincts and capacities. All schemes of improving human life 
must take account of man's original nature, most of all when their aim is 
to reverse or counteract it. 2 

Original nature, then, is a mosaic of reflexes and instincts, the 
latter differing from the former only in their greater complexity. 
Reflexes are the simplest manifestations of behavior; they are 
inborn responses which need only an appropriate stimulus to call 
them forth. Interesting examples are sneezing, laughing when 
tickled, and winking the eye when the organism is threatened. 
In the complex behavior situations with which personnel manage- 
ment is concerned, reflexes have little significance. Instincts are 
more important. An instinct, like a reflex, is an inherited tendency 
to behave in a certain way in the presence of particular stimulus 
situations, or at least a desire to so behave. The conception of 
"instinct" is indispensable in expressing simply the significant 
fact of heredity. Instincts are the elements of our hereditary 
equipment, in so far as these consist of dispositions to act in certain 
ways rather than others. 3 

Psychologists no longer assume that instincts exist as separable 
units of character. The instinctive responses of the organism are 
a complex network of interrelated activities. Internal stimulus 
and external stimulus conjoin to prepare the organism for response. 
Desires become motives, and motives, often reinforced by feeling 

1 VEBLEN, THORSTEIN, The Instinct of Workmanship, p. 1. 

2 THORNDIKE, E. L., The Original Nature of Man, p. 4. 
8 HOCKING, op. cit,, p. 50. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 81 

and emotion, create the reality of experience. Instinct, it has been 
observed, is the representative of the race at work within the 
individual. 1 This is why human beings in their instinctive behavior 
appear to be most natural, and to manifest their greatest power. 
"The instinct is a channel down which the current of life rushes 
with exceptional impetus; once committed to it, we reach our highest 
pitch of personal self-consciousness, our greatest sense of power 
and command." 2 

To admit that no single human trait holds undisputed title to 
individuality in response does not mean that human beings do not 
possess instincts. In a given situation numerous instincts are 
likely to be concerned; few instincts have a clear-cut right of way in 
response. Sense stimulus, central nervous adjustment, muscular 
response: that is the physiological pattern of an instinct. There 
is a sort of coalescence of impulses in human responses, and they 
seem to share vicariously in one another's satisfactions. Thus, 
successful wooing provides satisfaction for the mating instinct, 
acquisitiveness, self-assertiveness, and self-abasement. 3 Units of 
behavior, then, are a complex of responses to stimulus situations. 
Instinctive behavior is more primitive than reasoned conduct arid 
appears when consciousness fails to provide more effective modes 
of behavior in the process of adjustment between the organism 
and its environment. 

Innate impulses do not, of course, enjoy absolute control of the 
human organism. "Very few instincts remain intact in the human 
adult. The modifying pressures of environment are too insistent. 
The simpler reflexes keep their original forms, but even they are 
constantly reorganized jnto new acquired combination patterns or 
habits." 4 Inborn urges to activity are variable and adaptive and 
are controlled and checked by the imperious will to live; by reason, 
intelligence, arid habit; and by developed codes of moral and social 
conduct evolved in the life of the group. Man's responses change 
under the discipline of social codes arid cultural institutions, hence 
conceptual lines of response may differ radically from those indi- 
cated by the biological fact of instinct. Rationalized social control 
of instinctive behavior is one of the important accomplishments of 
social evolution. Human beings do not always surrender to the 
dictates of their hereditary impulses, but rather tend to construct 

1 See MYEBSON, A., The Foundations of Personality, pp. 108, 109?i. 

2 HOCKING, op. cit.j p. 60. 

3 Ibid., p. 66. 

4 BERNARD, L. L., An Introduction to Social Psychology, p. 115. 



82 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

a system of controls which preclude a return to native savagery 
through the blind following of inner urges. 1 

Industrial and social progress would be inconceivable without 
this conscious control and direction of inborn traits. The complex 
habits of "learned" ways of behavior which are developed through 
suggestion, imitation, and rational supervision constitute one's 
"second nature." It is the degree of modification of original or 
instinctive behavior which measures the difference between savagery 
and civilization, between the disciplined and the undisciplined life. 
Complete surrender to the dictates of instinct would spell ruin for 
the individual and society. 

The Relation of Body and Mind. Body and mind are insepa- 
rably related, structurally and functionally; together they con- 
stitute the totality of individuality. There is a constant interaction 
between physical and mental forces, and an obvious interdepen- 
dence. Out of this reciprocal influence of mind and body emerges 
the unity of the self. The mind is always affecting the body, and 
the body the mind. Underlying and conditioning all his conscious 
mental activities are mail's physical traits and powers. 2 

Man is in the first instance a " physicochemical engine," pro- 
ducing, converting, and discharging energy constantly. The 
creation and liberation of that power in the human organism 
involve operation of the muscular, digestive, nervous, and glandular 
systems. The mutual influence of these systems affects the tone of 
the entire organism. Any attempt to administer human relations 
intelligently must take cognizance of these physicochemical reac- 
tions. 3 The will to power anJ the central drive to action are asso- 
ciated with these resources of energy, which are tapped through the 
instinctive tendencies of the individual. "The nutrition of the body 
and of the nervous centers produces a readiness to act, and indeed 
an uneasiness if action is delayed." 4 This intimate interrelation- 
ship of the body and the mind is, as we shall see in detail later, full 
of significance in industrial employment. The more clearly 
management recognizes this mutually conditioning influence of 
mind and body the more accurately conflicts in employment relations 
and the causes of waste and inefficiency will be understood. 

The Emotions. Human nature consists not only of the native 
tendencies to action but also of certain native and unlearned ways 

1 Ibid. 

2 TEAD, op. tit., p. 16. 

3 See WOODWORTH, R. S., Psychology , A Study of Mental Life, Chaps. II, 
III. 

* HOCKING, op. tit., p. 103. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 83 

of feeling in relation to particular kinds of situations. Men and 
women are driven to action by tensions of feelings which are closely 
related to the impulsive drives. The importance of such feelings 
or emotions in employment relations is very great; they inevitably 
emerge in the complex organization of modern factory systems. 
Hence, understanding and control of such psychological forces are 
imperative, if efficiency and good will are to prevail. 

Moods and emotions are closely connected with the metabolic 
processes of the organism and the whole functional life of the 
individual. Emergency emotions, such as fear, anger, rage, and 
sex, repeatedly present serious problems in the management of 
human relations. No less important are the so-called "moods" 
or affectively toned attitudes and dispositions. 

An emotion is often defined as the way the body feels when 
prepared to act in a certain way. Profound and special significance 
is attached to organic changes under the stress of fear or rage, such 
as an increase of arterial pressure, quickening of the pulse, and 
change in the flow of the blood stream. 1 Emotion is fundamentally 
a drive to action. The organism is always in a state of suspense 
and tension until the act is performed and the emotional state is 
discharged. The importance of this emotional drive in the whole 
institutional life of society can not be exaggerated. Without it 
no institution could survive. 

A generally recognized fact of psychological experience} is that 
group consciousness, unity, solidarity, and cooperation are devel- 
oped and sustained through an appeal to and cultivation of the 
emotions of constituent members of the group. In the manage- 
ment of human beings, it is essential to remember that men and 
women do not live by impulse alone, nor yet alone by reason and 
intellect. Each individual invariably desires, often craves, emo- 
tionally satisfying experiences. Assuming a socially valid and 
defensible set of corporate objectives, deliberate cultivation of unity 
of purpose and desire among employees is perfectly legitimate. 
Adverse consequences of such action come only when the motives 
and aims of the corporation are concealed and insincere, designed 
to benefit employer interests only. Emotions give power to 
individual experience on the feeling side, and, when properly 
directed, make possible the attainment of individual and social 
purposes. Fear, anger, hate, and love are notable examples of 
these psychic resources. 

Fear is a disturbed state of the organism which results when 
strange or sudden objects are encountered and cause efforts to 

1 See BRIERLY. S. S.. An Introduction to Paucholoau. DD. 83-86. 



84 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

escape. Biologically, fear is a state of preparedness to act in the 
direction of flight induced by definite activity in the glandular and 
muscular systems. During fear, attention and thought are char- 
acteristically centered on the feared thing and on the urgency of 
escape. Hence, fear is always inhibitive. There is preoccupation 
with results, and normal functioning of the organism is impossible. 
Similar conditions result from stress of pain, anger, rage, and 
hatred. The resultant action of these emotions is special, limited 
and temporary; the excitement of stimulation invariably is followed 
by reaction or inaction. Fear, hatred, anger momentarily mobilize 
powerful resources in the individual, but it is an inescapable truth 
that they require constant stimulation to be kept effective. Wars 
demonstrate this fact. While a motivation of fear has some justi- 
fication in the promotion of safety and health programs, systematic 
education has proved much more enduring in its results. Appeals 
to fear of unemployment, discharge, low income, and discipline 
tend to destroy later appeals to loyalty, workmanship, and interest 
in the job and the enterprise. 

Anger and hatred, which are emotional states generated by 
strange, unjust, or obstructive conditions, are, like fear, destructive 
of industrial good will and efficiency. These emotional experi- 
ences represent a disturbed condition of the organism which centers 
attention on ways and means of removing the source of difficulty. 
An angry or hateful person is preoccupied, single-minded, imreftcc- 
tive, and invariably negative and destructive. Every appeal that 
was ever made to class, religious, or race hatred has amply demon- 
strated this truth. In the office or workshop, correction of 
employees' mistakes is not best made through displays of anger and 
severe disciplinary measures, since anger begets anger, opposition, 
resentment, and noncooperation. 

Love or affection as a simple emotion is primarily sexual in its 
stimulation, but as a drive in human behavior it has a general and 
more significant character. Industrial and business experience 
everywhere is replete with examples of the efficacy of this emotion 
in developing devotion, loyalty, and cooperation. It is infinitely 
more effective as a propelling force for productivity than are such 
emotions as fear, anger, and hatred. Psychologists have proved 
that the mechanisms which produce the moods and emotions in 
individual life are highly subject to training or education. Emo- 
tional appeals when associated with intellectual appeals and valid 
objectives are essential to tap the springs of human action, but 
they must be integrated in a program designed to avoid extremism 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 85 

and excess of all kinds. Otherwise, control and direction of moods 
and emotions will yield disastrous results. 

Habits. From the moment of his birth to the time of his death, 
man is engaged in the formation and the re-formation of habits. 
This process of habit formation is fundamental in human behavior. 
Viewed psychologically, habit is a force which impels to activity 
and has within itself a certain ordering of its own elements. Habits 
are acquired through a series of trials or experimentations which in 
the end create an established behavior pattern through the appro- 
priate combination of nervous and muscular response. That is to 
say, habits are formed by acquiring through practice a motor and 
mental alignment of responses which appear somewhat regularly 
in the expected pattern. This is as true of mental habits as it is of 
physical habits. 

The importance of habit in employment relations is well estab- 
lished. Jobs require habit formation and re-formation. This 
whole process is, of course, intimately related to such factors as 
intelligence, aptitudes, training, and experience. Habits unite 
with instincts, emotions, and rational behavior to help form the 
totality of individuality. Behind the habits of an individual there 
may be numerous forces which must be recognized in personnel 
administration. Physiological conditions often combine with 
psychological, economic, and social conditions to influence the habits 
of individuals. Correction of undesirable habits of life and work, 
therefore, must begin with the removal of the causative conditions, 
plus determination to rebuild the behavior pattern. Intelligent 
and sympathetic understanding and direction, patient instruction, 
and generous cooperation are necessary in reshaping the habits of 
personnel in relation to jobs and fellow workers. 

The problem of habits is, of course, wrapped up with the 
learning process, which concerns itself with the utilization of past 
experiences to make new experiences easy, intelligible, and useful 
to the individual. In this connection industry, like all institutions 
which use the learning process, must mobilize the factors of interest, 
attention, memory, intelligence, reasoning ability, imagination, and 
judgment. Imitation and suggestion are helpful forces in this 
learning and teaching relationship. 

Psychology and the Control of Human Nature. One of the 
functions of the psychologist is to describe fully and explain human 
behavior in its relation to stimulus situations. The industrial 
psychologist is concerned primarily with the mind of the worker; 
his interest is centered in the mainsprings of human conduct in the 



86 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

employment relationship. The mind of the worker is not open to 
inspection except as it is revealed in and through behavior. It is 
the relation between behavior and stimulus situations that claims 
the attention of the psychologist. Psychological science has 
yielded the truth that the growth of an individual* may' be so 
guided and directed as to assure a relatively satisfactory adaptation 
to situations, and that situations may be so altered as to eliminate 
undesirable conduct and encourage desirable conduct. This recon- 
ditioning and rebuilding of habits is an acknowledged function of 
applied psychology, of which industrial psychology and psycho- 
technology are a part. 

The behavior patterns of individuals can be studied scien- 
tifically, and the resultant data can be used in the reconstruction 
of human conduct. The adequacy and appropriateness of stimulus 
situations can be determined from a study of responses. In this 
way, desirable and effective responses can be cultivated through 
modification of the stimulus situations in which the organism finds 
itself. Stimulus situations which excite human beings to action 
may be either internal, originating in such physicochemical factors 
as glandular secretion; or external, having their inception in the 
organism's environment; or both. Observation has shown that 
stimulus situations may be fairly enduring in their relation to 
responses. As such, they are called "motives," "incentives," 
"urges," or "desires." The word "motive" refers to the central 
drive which formerly was known as "will power" or "deter- 
mination." 

The responses of human beings to stimulus situations are made 
possible by the fact that the human body is equipped with a large 
number of muscles arranged on a bony framework movable in coordi- 
nation. In recent years especially, the importance of the glands of 
internal secretion in relation to behavior has been widely recognized 
by zoologists, physicians, and psychologists. 

Psychologists no longer attribute human behavior to any 
central impulse or force, such as the "will." Motivation has not 
infrequently been attributed to an innate faculty of the mind, 
referred to as "will," "determination," "choice," or "resolution." 
We now know that all desires and incentives have their origin in 
what are called the tissue needs of the body. Such tissue needs as 
hunger, thirst, sex, desire for change, desire for rest, etc., are the 
elements out of which motivation to activity issues. 1 Tissue needs 
in turn are closely connected with the metabolic process of the 

1 GRIFFITH, C. R., Introduction to Applied Psychology, p. 565. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 87 

physical organism, that is, with the bodily functions that build 
dead food into living matter and, conversely, break down living 
matter into simpler products within the organism. 

The fundamental assumption underlying all attempts at the 
control of behavior is that human nature is more or less com- 
pletely subject to laws which can be discovered and used by psycho- 
logical science. Acting upon this assumption the psychologist 
endeavors to enhance the predictability of human behavior first, 
by understanding it, and second, by constructing procedures for 
its control. Experimental psychology has assumed the strict 
determinism of human thought and action. Human nature is, of 
course, tremendously complex and variable; an immense number of 
factors have to be controlled if human behavior is to be controlled. 
The psychologist approaches this difficult problem of control in the 
assurance that there is a large number of stable connections between 
stimulus situations and responses. This is the foundation of the 
learning process, as well as of the predictability of human conduct. 

Psychotechnology and the Problems of Personnel Relations. 
The application of psychological facts to industry constitutes what 
is known as the field of psychotechnology] In the discipline of 
psychotechnology, the phrase "differential psychology" or "indi- 
vidual psychology" has considerable importance "simply because 
the man in the factory, like the child in the schoolroom, is not a 
typical or average person but a distinctive individuality." 1 Indi- 
vidual differences rather than individual resemblances are what 
make significant the application of the science of psychology to 
the human equation in the workshop. The industrial psychologist 
must determine the origin of these differences and discover, if 
possible, the most effective method of changing through practice 
those differences which are modifiable. All human beings have a 
personal equation; each individual is a separate personality and 
"must be handled as an entity when it comes to a question of 
fitting him into industrial or commercial operations." 2 These 
differences between individuals are created by such factors as age, 
sex, race, and maladjustments of various types. 

The problem involved in the application of psychological prin- 
ciples and practices to employment relations is revealed in the 
extent to which individuals actually differ from one another in the 
total range of their capacities, talents, aptitudes, training, and 
experience. Talents and aptitudes are paramount factors. The 

1 Ibid., p. 438. 
* Ibid. 



88 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

best workers may and invariably do earn twice as much as the 
poorest workers, where there are no artificial limitations on effi- 
ciency and earnings. Speed of decision, motor inhibition, volitional 
persistence, and many other psychological traits are responsible for 
variations in excellence among employees. Among 'persons ordi- 
narily regarded as normal, the most gifted will be from three to 
four times as capable as the least gifted. Taking individual dif- 
ferences as a whole, however, the ratio 2:1 probably constitutes a 
more accurate representation of the differential. 1 

The results of individual differences, of course, cannot be 
accurately measured in quantitative terms. Relatively slight 
differences between individuals may make "an enormous amount 
of difference in the part these persons may play in a social group. 
Slightly greater facility of one man in a factory over another can 
easily give the one steady work, whereas the other will be laid off 
whenever the factory load is decreased." 2 Industrial experience in 
every country proves this statement. The incidence of unemploy- 
ment rests most heavily upon those who are commonly designated 
as unskilled and least efficient. 

Individual differences originate in what we have discussed in 
previous pages as " hereditary dispositions." Although environ- 
mental influences, whether economic or social, must not be dis- 
counted in determining differences in individual performance on 
the job, hereditary forces are most responsible for marked 
variations. Individual differences are largely native in character. 
It is important, therefore, that these native differences be dis- 
covered prior to the employment of individuals, certainly before 
their placement on jobs in which they may cause accidents or 
similarly serious problems. One should recognize that some 
individual differences can be eliminated, if they are the result of 
acquired characteristics, such as bad habits and improper training. 
A proper system of education and training is sufficient to correct 
such differences. Experimentation has proved, however, that mere 
instruction and practice are not ordinarily effective in leveling out 
performances of individuals, where these are due to hereditary 
variations. 3 This fact makes imperative an adequate system of 
selection and placement, which should always be reinforced by an 
effective plan of follow-up. 

1 See WECHSLER, D., "The Range of Human Capacities," Scientific Monthly, 
vol. 31, 1930, pp. 35-39. 

2 GRIFFITH, op. tit., p. 440. 
8 Ibid., p. 442. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 89 

Because adults are more or less stabilized in their traits and 
talents, industry must take them pretty much as they are found. 
The process of remaking or remodeling human behavior is an 
extremely difficult and costly one, and the results are seldom reas- 
suring. Industry, therefore, needs the assistance of psychotechnol- 
ogists in discovering hereditary and environmental sources of 
individual differences and in devising a workable system of fitting 
men and women into appropriate working situations. 

The function of psychotechnology, then, is to bring to the 
understanding of personal and social activities in employment 
relations the same degree of guidance, planning, and intelligence 
which is often brought to bear upon other problems of living 
through the aid of the physical and biological sciences. Industry 
has long since availed itself of the results of such physical sciences 
as physics and chemistry, with the result that nature has become 
the servant rather than the master of man. The social sciences, 
including especially economics and psychology, promise just as 
resourceful assistance if employers can be persuaded to utilize them. 

Management's Stake in the Control of Human Factors. What 
has thus far been said concerning the nature of human beings and 
the inescapable fact of individual differences, whether due to 
hereditary or environmental forces, suggests management's interest 
in and responsibility for adequate comprehension and control of 
the personal equation. Until now management has made com- 
paratively little use of the extraordinary resources of applied 
psychology in the selection, placement, and maintenance of per- 
sonnel. In this fact may be found the cause of much incompetence 
in the administration of labor relations and the persistence of 
friction and conflict between management and workers. 

From the standpoint of economic self-interest, what manage- 
ment wants is minds and energies permanently committed to an 
agreed objective, namely, economical and efficient production. 
The manager wants to "develop a motivation or urge to action in 
his group which of itself spontaneously generates from within their 
efforts to get the results sought. He wants a situation in which 
cooperation has become the natural and dominant mood and method 
of his group." 1 That is, he wants genuine zeal throughout his 
enterprise. Morale may be temporarily strengthened by such 
devices as athletic events, general recreational programs, sugges- 
tion systems, and group insurance plans, but these are not sufficient 
to guarantee complete cooperation on the part of the personnel for 
1 TEAD, op. cit., pp. 4r-5. 



90 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

an indefinite period. Employees must become familiar with and 
clearly understand the general aims of management and the enter- 
prise, and they must be convinced that such aims can be reconciled 
with their own self-interest. Without this clear perception of 
identity of aims and motives, friction and noncooperation are 
inevitable. It has been said, "The activities which people do 
well, faithfully, and persistently and which give them that vital 
sense of spontaneous generation from within are those prompted 
by a realization that they themselves are getting a sense of self- 
fulfillment from them/' 1 Industrial experience has amply demon- 
strated the validity of this observation. 

The objectives of enlightened managerial procedure, which the 
science of personnel administration seeks to encourage, are the mini- 
mization of conflict of aims, the enhancement of mutual under- 
standing, the cultivation of enthusiasm, and the humanization of 
employment relations. To this end, it has been observed, "It is 
supremely necessary that on the job and face to face with individuals 
and groups, executives should be themselves, be natural, spontaneous 
and, sincere." 2 Every executive must be a sympathetic and under- 
standing human being if he is to succeed, because he is dealing with 
other human beings possessing traits similar to his own, who have 
immeasurable potentialities for cooperation and noncooperation. 
Experiential basis exists for the belief that in the future successful 
industrial management will depend as much, if not more, upon the 
intelligent administration of men and women as upon the organiza- 
tion of mechanical factors and the tapping of material resources. 
There is a pressing need for the management of men on a human 
and an equitable basis. Management's ablest allies in this new 
approach to employment relations and problems are the industrial 
psychologist and the specialist in personnel administration. 

The Changeability of Human Nature. Management's interest 
in understanding and controlling human nature is necessarily a 
derivative of the conviction that human nature can be modified 
and human behavior consciously influenced. The belief that 
human nature cannot be changed has ever been advanced in 
opposition to economic and social reform, and, consequently, against 
all modifications of traditional managerial attitudes and policies. 
"Human nature," conceived as the sum of inherent and acquired 
characteristics exhibited in behavior, does change and develop 
both in the life of the individual and in that of the race. Conceived 

* Ibid. t p. 6. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 91 

in the narrower sense of inborn traits present in the nervous system, 
functioning without special direction, human nature probably 
remains very much the same. This factor of relative permanence in 
human traits is reason for both hope and despair, and provides the 
foundation for the science of psychology; hope, because it implies 
that once we understand human nature and comply with the laws 
of its behavior we can devise effective means of utilizing it to its 
maximum potentiality; despair, because, if human traits are fixed 
and unchangeable, there are definite limits to the reconstruction of 
human behavior. Wise administration of human relations in every 
group will recognize both the potentialities and the limitations of 
control. 

For the functioning human organism, modern industry and 
business have considerable significance. The industrial environ- 
ment provides a comparatively new and unaccustomed medium for 
action. The increasingly complex organization of economic life 
presents problems of challenging proportions to all who are inter- 
ested in the administration and direction of human nature. Modern 
industry and business present environments which impose burdens, 
restrictions, arid disciplines unknown to mankind even a few genera- 
tions ago. The adaptations which are required of the human 
organism in contemporary economic organization are extremely 
complex and exacting, a marked contrast to the simpler adjustments 
required by the relatively simple economic systems of the pre- 
capitalistic era. Formidable problems of human behavior and its 
control are thus presented because human beings arc thrown into an 
environment which is not only increasingly complex but which is 
constantly undergoing radical changes occasioned by the irresistible 
march of invention and technological improvement. 

What has just been said makes it doubly important to keep 
constantly in mind the conclusions concerning the totality and 
unity of human behavior. The real practical danger in dissecting 
the elements of human nature into categories of inborn and acquired 
traits lies in forgetting that in industry and business, as elsewhere, 
human nature functions as a whole; it functions as a totality in an 
always changing, evolving succession of stimulus situations. 
Human nature is essentially an outward manifestation of inward 
states; it unfolds in a' constant stream of responses to external and 
internal stimuli. Impulses remain unchanged and unchangeable; 
their manifestations may be completely reconstructed. Skillful 
control of human nature involves an intelligent selection of forms 
and methods of expression. Human nature in its hereditary ele- 



92 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

merits may remain unchanged; human conduct is greatly modifiable. 
Inborn characteristics cannot be destroyed; they may be repressed 
or sublimated. 

Repression of Human Traits. Lacking knowledge of original 
and acquired traits in their complementary relationship, manage- 
ment is often a negative, suppressive control of human conduct 
rather than a positive, constructive direction of human impulses and 
habits. It is a major task of the science of personnel administration 
to harness these natural arid acquired characteristics for the con- 
structive and cooperative performance of work. In achieving this 
aim, however, management must keep in mind the fact that nurture 
is as important as nature. Nurture selects, combines, arid modifies, 
and, although it cannot eradicate the unlearned impulses of the 
organism, it can direct and control them. Human nature is the 
sum total of human dispositions or capacities, including those which 
are hereditary and those which are acquired. 

The lack of an intelligent appreciation of human nature, coupled 
with a conscious endeavor to suppress it as something inherently 
bad, is partly responsible for the universal revolt against traditional 
institutions and methods of social and industrial control. Instinc- 
tive tendencies may be suppressed temporarily, but they cannot be 
destroyed. Even if the attempt to repress them is successful, the 
success is likely to be only temporary, since new and, in all prob- 
ability, more violent destructive outlets will be sought for the 
expression and satisfaction of these basic impulses and emotional 
experiences. "The impulses that have prompted to a realization 
of the fullest possible life have, in practice, been too strong to be 
permanently thwarted. Whenever, too, essential impulses are 
denied legitimate expression, they tend to break out in a perverted 
form, and to take a costly revenge for their denial. To lose any 
of our human powers is to forfeit a part of our birthright." 1 These 
unreasoned impulses are the driving force of our endeavors; they 
may drive us upward or downward, depending upon their guid- 
ance. When this original or primitive self explodes, reason totters 
on her throne, and the results are often disastrous to the life of the 
individual and of the society of which he is a part. If suppression 
of this natural self inevitably results in psychic revolt against those 
conditions and those persons responsible for repression, it is funda- 
mental to industrial peace, efficiency, and progress that the original 
channels through which this self is expressed shall not be blocked. 
A prominent industrial psychologist of England has stated this 

1 EVERETT, W. G., Moral Values, p. 162. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 93 

thought as follows: " Development depends upon free and varied 
expression, and in so far as modern industry prevents this it is eitLer 
dangerously diverting or damming up a flood which will eventually 
burst through its barriers and destroy what we treasure most." 1 

Carl ton Parker saw the problem with remarkable clarity when he 
suggested that three manifestations are possible in the career of any 
impulse activity. First, the impulse may find a surging, explosive 
discharge along blind and unintelligent lines of procedure and satis- 
faction. Second, the impulse or desire may be sublimated, that Ls, 
it may become a factor coordinated intelligently with others in a 
continuing and more or less rational action. Thus, a gust of anger 
may, because of its dynamic incorporation into disposition, be con- 
verted into an abiding conviction of social injustice to be remedied, 
and furnish the power to carry the conviction into execution. 
Finally, an impulse may neither be immediately expressed in iso- 
lated, spasmodic action nor employed directly in an enduring interest, 
but rather it may be almost completely suppressed. 2 Suppression, 
however, is not annihilation. Psychic energy is no more capable of 
being destroyed than are those forms we recognize as physical 
energy. 

If it is neither exploded nor converted, it is turned inwards, to lead a 
surreptitious, subterranean life. An isolated or spasmodic manifestation 
is a sign of immaturity, crudity, savagery; a suppressed activity is the 
cause of all kinds of intellectual and moral pathology. 3 

There is no more important lesson for managers to learn than that 
the inborn forces of race, at least in their psychological elements, 
are never capable of complete annihilation; suppression may dam 
them up, but they await the earliest opportunity for release and 
expression. 

Industrial Significance of Repression. The psychological 
aspects of industrial efficiency are increasingly claiming the 
attention of scientific managers. Those responsible for the direc- 
tion of industry are beginning to learn what psychologists and labor 
economists have long since taught, namely, that behavior in anger, 
fear, pain, and hunger is quite different from behavior under repose, 
contentment, and economic security. The first set of psychic states 

1 WATTS, FRANK, An Introduction to the Psychological Problems of Industry, 
p. 175. 

2 PARKER, CARLTON H., "Motives in Economic Life," American Economic 
Review, Supplement, vol. 8, no. 1, March, 1918, p. 216. 

3 DEWEY, JOHN, Human Nature and Conduct, p. 157. 



94 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

issues in malcontent, discord, and inefficiency; the latter issues in 
industrial peace, harmony, and increased productivity. Balked 
instincts do not conduce to quantity and quality production; rather 
do they mean limitation of output, waste of materials, abuse of 
equipment, absenteeism, turnover, and careless use of machines. 

Psychologists have found that under the stress of emotional 
disturbances individuals tend to relapse to lower levels of 
efficiency. This process, known as repression, is caused in industry 
by certain powerful forces of working-class environment which are 
generally referred to as monotonous work, dirty work, the servile 
state of labor, economic insecurity of the worker, industrial autoc- 
racy, industrial fatigue, labor turnover, the labor spy, ca' canny, 
and soldiering on the job. Carlton Parker, who was a creative 
pioneer in the application of psychology to industrial problems, 
suggested that the worker who finds his native impulses balked 
pursues one of two lines of conduct. First, he weakens, becomes 
inefficient, drifts away from the plant, loses interest in the quality 
of his work, drinks, or deserts his family; or, second, he indulges in 
inferiority compensation, and to dignify himself, to eliminate his 
sense of inferiority and humiliation, he strikes, commits violence, 
or stays on the job and injures machinery or mutilates materials. 
Dynamite conspiracies may appeal to him, and he may welcome 
sabotage as a justifiable means of reprisal. In this state of unrest 
psychosis, the worker is not a responsible agent; he has departed 
from a state of psychic normality; his whole primitive nature is in 
revolt against the industrial system; he is psychologically malad- 
justed. 1 His whole being in revolt, the worker sinks to the lowest 
levels of economic inefficiency and social irresponsibility. This 
revolt may be violent and manifest to all, or it may be quiet, peace- 
ful sabotage, hardly discernible even by those who are iii immediate 
charge of the work of supervision. 

The Need for Intelligent Direction. If the repression of basic 
instincts affects so adversely the whole economic and social organiza- 
tion and disrupts the normal relations between employers and 
employees, it is logical to expect that rational control and sub- 
limation of these inborn habits of race will issue in happier relation- 
ships and welcome economic effects. Two sets of problems must 
inevitably claim the thought and attention of scientific manage- 
ment. One set is technical and centered in the efficient and eco- 
nomical organization of money, materials, equipment, and machines. 

1 For an excellent analysis of this subject, see Carlton H. Parker, The Casual 
Laborer and Other Essays. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 95 

Such problems demand the resourcefulness and ingenuity of the 
experienced financier, the trained mechanical engineer, and the 
business manager. These problems rise around material, passive, 
inanimate forces of nature, forces which become plastic beneath 
the skill and inventive genius of man. The other set of problems is 
psychological and physiological, centering around the effective 
organization and management of labor. Such problems demand 
the wisdom and tact of the expert in industrial relations, the human 
engineer, who understands the elements of human nature and knows 
how to administer labor relations. These problems develop 
from the predispositions to activity, the innate qualities of race, the 
acquired modes of behavior, and certain categories of ideas that 
are conditioned by the social environment. 

Human Nature and Our Machine Civilization. The last decade 
has witnessed the growth of definite sentiment favoring a retro- 
gression to the simpler modes of living and working, such as pre- 
vailed in medieval civilization. All this is but a desire for escape 
from the unending grind of living daily by machine methods and 
monotonous routine of machine processes. There is little doubt 
that man's hereditary traits fit him best for primitive conditions of 
life and a simple state of economy and that this complex machine 
age is a severe strain on his nervous structure. Waves of un'cst 
and revulsion are evidence enough of this fact. The unmistakable 
protest against our machine civilization, however, will prove more 
or less ineffectual. No amount of idealistic theorizing concerning a 
return to the simplicity of the craft-guild age will prove of general 
practicability. The complex civilization of our modern day is 
inseparably related to the machine. Humanity would bo unable 
to maintain its present standards of comfort, luxury, and leisure 
without the continuance of machine methods and processes. 
Improvement in industrial relations lies rather along the line of 
scientific adjustment of machine methods to native tendencies and 
acquired habits of thought and behavior, and in the reorganization 
of the working environment with a view to the freest liberation of 
human traits and faculties. It is to this practical function of per- 
sonnel management that we now turn our attention. 



CHAPTER VII 

PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

(Continued) 

Mainsprings of Human Behavior in Industry. There appears 
to be no agreement among psychologists as to what tendencies of the 
organism are instincts, in the sense of specific responses to specific 
stimuli. Some psychologists maintain that there are no instincts. 
This, however, is an extreme point of view. Freud and his followers 
recognize but two fundamental instincts, sex and self -preservation, 
which are said to be the determinants of all human behavior. To 
these the herd instinct is added by some. Other classifications 
have included anywhere from a dozen to over a hundred instincts, 
but the present tendency in psychological analyses is to reduce the 
number to relatively few. The natural tendencies which have 
commanded most attention as having especial industrial significance 
include workmanship, acquisitiveness, pugnacity, self-assertiveness, 
self-abasement, gregariousness, curiosity, sex, parental bent, play, 
and reflectiveness. These tendencies may not be instinctive, but 
they are predispositions which are reflected in human behavior. 

In examining the relation of these impulses to industrial life, one 
must be mindful of the fact that such natural tendencies rarely, if 
ever, function separately. Instincts do not react independently of 
one another and as self-contained units of energy which habitually 
master the whole personality. Rather are they racial habits of 
reaction which have proved serviceable to situations of life, and 
so have been retained by the species in possession of them. When 
an instinct expresses itself, the whole being is affected. There is a 
remarkable coordination of the whole human mechanism, and, 
although the organism responds in divers ways under varying 
circumstances, there is invariably a sympathetic alliance among 
these native responses. 

Psychologists have proved that the more effectively a course of 
conduct provides satisfaction for several emotional tendencies, the 
more frequently and fervently will it be repeated and the more 
difficult will it become to break down. Industry must, therefore, 
furnish adequate and appropriate stimuli to the whole human 

96 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 97 

organism. Instinct frustration rather than freely selected modes of 
instinct expression seems to characterize modern industrial life. 
Management's point of view is, however, undergoing considerable 
change. There is an increasing acceptance of the doctrine that if 
industry is to function peacefully, efficiently, and justly, the worker's 
whole nature must be intelligently understood and properly stim- 
ulated. This is imperative, if, as has been observed, "nearly ail 
our industrial troubles today are due to the disappearance of satis- 
factions to which men had become used, and the absence of new 
ones to substitute for them." 1 

Creative Experience in Work. Constructiveness, contrivance, 
or the basic human desire to create things, which is referred to as 
the instinct of workmanship or the creative impulse, is a genuine 
urge of man's nature. It is as natural for the human child to make 
mud pins, build sand castles, or erect snow fortresses as it is for the 
birds to build nests or for the bees to construct the honeycomb. 
There is, however, a significant difference between man and his 
lower kin of the animal kingdom; namely, animals rarely 
improve on their hereditary pattern, whereas man's creative 
activities are characterized by ever-increasing variety in aims, 
methods, and results. "Thus the beaver constructs one type of 
home, the thrush one type of nest, but the houses of man are infinite 
in their diversity. So with all he does : his restless invention is ever 
appearing in new forms of surprising originality." 2 Out of this basic 
impulse have emerged modern machine methods which are 
responsible for modern capitalism. Scientific observers of 
human nature in industry have concluded that the craftsman's 
incentive to industry is not the mere gaining of a livelihood but the 
satisfaction of his desire to create things and to find adequate 
expression for his abilities and capacities. 3 

No count in the indictment of modern industrialism has received 
more emphasis in recent years than the current tendency to balk 
the free expression of the creative impulse. The appeal of manage- 
ment has hardly been to this desire. Mass production has been 
stressed; interest in workmanship has been sadly neglected. The 
ancient and medieval systems of industry stimulated careful 
craftsmanship; the modern system of industry stimulates motives of 
gain. For this reason the existing economic order is criticized as 

1 WATTS, FRANK, An Introduction to the Psychological Problems of Industry, 
p. 204. 

2 Ibid. 

9 WATTS, op. cit., p. 191. 



98 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

being acquisitive rather than creative. A typical sample of this 
criticism is the following: 

Our modern industrial system, with an ingenuity so wicked that one 
might almost believe it to be deliberate, has contrived to take the joy out 
of craftsmanship, and so to choke up the very springs of art. It has 
replaced, whenever possible, the deliberate skill of the human hand by 
inhuman machinery, and the independent thought of the human brain by 
"soulless" organization. It has removed the maker or producer from all 
association with the public for whom he works, and substituted a deadening 
"cash nexus" for the old personal relationship or sense of effort in a cor- 
porate cause. Above all, it has taken from him his liberty, and forced him 
to work for a master who is no artist, and to work fast and badly. 1 

This is a severe contrast with the same author's description of 
craftsmanship in an ancient civilization. 

It is natural for human beings to enjoy using their own best faculties. 
Men never felt that enjoyment so keenly, or put so much high effort into 
its attainment, as in the workshop of ancient Greece. . . . There is hardly 
an object that they made, however crude, but bears on it, sometimes 
faintly, sometimes with speaking clearness, the touch of the spirit of art. 2 

The balking of the creative impulse is attributed to machine 
processes and their management. The machine, salesmanship, 
advertising, and monopoly have largely replaced good craftsmanship 
as the determiner of price. Current methods of production, with 
their subdivision of labor, monotonous and repetitious operations, 
excassive speeding up of work, rigid discipline, and close supervision, 
militate against careful craftsmanship. The worker tends now to 
be a mere adjunct to the machine. Whereas he once owned the 
tools, set his own speed, and planned his own methods, he now finds 
that the machine is timed and set for him, his methods come from 
the planning department, and his raw materials are systematically 
routed according to schedule. His degree of self -direction is 
diminished as the machine is perfected and made automatic. He is 
forced to adjust his physical and mental powers to the time, rhythm, 
and functioning of the machine; he merely feeds it and takes from it 
the product it continuously yields in clocklike precision. Mechan- 
ical science has reduced the importance of his personality to a 
minimum. His individuality, which was once reflected in the 
goods he made, is now absorbed into the machine and is precluded 
from sharing creative experience. 

i ZIMMBBN, A. E., The Greek Commonwealth, 1922 ed., p. 260. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 99 

The modern factory or office worker performs his task, not 
because he has a spontaneous interest in it, but rather because his 
employer will pay him a definite wage. The content of the pay 
envelope and the progress of the hands of the clock have assumed a 
primary importance. The worker is likely to be more interested in 
what he gets than in what he gives, or what he does, or how he does 
it. The creative elements of the job have little appeal for him, 
and he receives with cynical contempt or indifference the suggestion 
that there is joy in work. To him work is just work, and that 
means the absence of play and pleasure. But this reaction is not 
natural. 

One should not conclude that the physical hardships of modern 
industry are on the whole greater than those entailed in earlier 
systems. Neither the hardship nor the exploitation current in 
modern industry is a new factor in the life of the industrial worker. 
But the increasing discredit of skill and productive effort in the 
qualitative sense becomes the disturbing factor to those who 
seek to improve human experiences and relations in industry. It is 
doubtful whether machine-made goods are inferior to the products 
of the old-time craftsman. Standardization and machine methods 
have brought greater accuracy and uniformity. Our concern here 
is not with the comparative hardships and merits of the old and the 
new industry, but rather with the influence of current methods upon 
the effectiveness of the worker. The question is not one of choosing 
between a machine industry and some other kind of system. The 
cards are stacked against us. We are committed to a machine 
civilization whether we like it or not. 

Mechanization and systematization of industry are quite likely 
to have an adverse effect upon the mental life of the worker. 
Denied a part in planning and improving the performance of the 
task, there is little incentive to initiative and effort other than the 
minimum required by the almost self-operating machine. Each 
task is done over and over each day and every day the same, with 
almost unvarying speed in an unvarying way. 

Monotony, which has a dulling effect upon the mental reactions 
of the worker, is not, however, without some advantages. Man 
needs a measure of monotony in toil, since shifting at a rapid rate 
from one job to another bothers him. Tending a machine often 
becomes such a routine task that the worker's mind Is released for 
thought extraneous to the job. Monotony is the price we pay for 
living together in an organized community affording unprecedented 
comforts and conveniences. Were modern civilization to return 



100 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

to its primordial stages with their simplicity of economic structure, 
the race would have to do without many things necessities and 
luxuries -which the machine and subdivision of labor alone can 
assure it, in sufficient quantities to go around. 

There is another phase of monotonous, repetitious work which 
must not be forgotten, namely, its peculiar attraction for the feeble- 
minded, low-grade worker. So perfect has* the modern machine 
become that in many Qases feeble-minded workers make the best 
machine tenders. This applies only to those machines character- 
ized by simplicity of structure and operation, which require in the 
operator only enough sense to master simple and routine duties and 
to appreciate the necessity of faithfulness to the job. The efficiency 
of modern industrialism is thus putting a premium upon mental 
deficiency and is making it possible for subnormal individuals to 
adjust themselves readily to certain mechanical processes. The 
adverse effect which such changes will have upon the application of 
democratic principles to the control of industry can easily be 
imagined. The feeble-minded do not covet a voice in the councils 
of industry. 

In the case of normal workmen, a different situation presents 
itself. For them, monotony intensifies the labor strain, and, unless 
relief is found through variations in physical and mental effort, 
it tends to have disastrous results. The subnormal employee is 
probably immune to the irritabilities of routine work. 

There is less in his soul striving to release itself; he has brought into the 
shop comparatively little that the shop cannot use; and so he accepts 
dumbly his appointed place in the scheme of things industrial, remains 
unbittcn by ambition, and reacts not at all against subordination. The 
less mind one lias, the less it resents that invasion of personality which is 
inseparable from large-scale and mechanized enterprises. 1 

In all probability, even the normal man finds a source of satisfac- 
tion in habit; when the job becomes automatic he can allow his 
mind to ponder over many things of interest and permit his fancies 
to wander. Routine also gives him time to think over any injustices 
which may be recurring in his industrial life and the life of his class. 
Scientific management is making this more possible, because it seeks 
to transfer to management the body of knowledge and skill formerly 
monopolized by the craftsmen and to centralize it in the planning 
department, where it is analyzed, standardized, and mechanized 
and then handed back in separate unit processes to semiskilled 
workmen, none of whom are familiar with the whole process. 

1 PniiNTT). ARTHUR. Thp Trnn Mnn in TvuliLRlrii n Rd. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 101 

Even among those who may be classed as normal workers, 
creative interest does not exist in equal degrees of intensity. If 
there is no universal manifestation of creative desire, it may not be 
because the employee lacks this desire but because the working 
environment is such as not to elicit response. There are workers 
who rebel against the tendency of modern industries to thwart the 
expression of their creative capacities, but there are also those who 
are adapted to these tendencies, who find routine restful and 
attractive, and who resent any attempt to educate them into alert- 
ness. Unlike the subnormal class, this latter class possesses poten- 
tial capacity for self-expression but grows indifferent to it. 

The discouraging thing for creative normal workmen is that, 
when their desires have found constructive expression, the employer 
appropriates these ideas, suggestions, inventions, and improvements 
without in all cases giving the workers either financial or non- 
financial recognition. This is becoming more and more true as 
corporations build and equip their own laboratories for experimental 
work. The employer defends the practice of expropriation on the 
grounds that the wage or salary paid the employee covers not only 
the results of physical labor but mental activities as well, and that 
the company furnishes the funds for experimentation. While this 
may appear sufficiently reasonable and justifiable to the employer, 
it does not satisfy the worker's craving for distinction and recogni- 
tion. Such a policy tends to discourage creative effort. 

The preceding discussion of the impulse of workmanship suggests 
that ways and moans must be found to recapture the intensive 
interest in work which once characterized craftsmanship, to redis- 
cover the joy of workmanship, and to stimulate powers of invention 
and improvement which are rapidly escaping from all save the 
highly trained technicians and intellectual leaders. Society 
cannot afford to pay the price of material progress obtained by 
the dulling of workmen's sensibilities in repetitive industries. Some 
escape is imperative not only as a basis for increased efficiency in 
industry but also as an incentive to peaceful and constructive 
social progress. Variation in mental and physical activity has an 
effect upon the ideals of industrial workers no less notable than 
upon the ideals of other members of society. The true craftsman 
finds a great ideal in free opportunity for creative work. But in 
the modern factory, mill, mine, and shop, the wage earner finds little 
that sustains his interest, captivates his imagination, and fires his 
ambition. Conditions of industry rather antagonize him and drive 
him to seek a life of excessive leisure with its freedom from 



102 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

responsibility, or to discover revolutionary means of destroying 
the existing economic regime. It has been wisely said that to 
prosper by worthy achievements is the aim of the man who has 
found his life work, but to get rich by luck is the object of those 
whose work is their prison. 1 

If the creative impulse is to be successfully stimulated, every 
effort must be made to introduce variety into the performance of 
work and to provide for the workman a larger measure of self- 
direction and self-control. Scientific selection and placement of 
employees must .be accepted as a principal rule of management, and 
the pace of the machine, the speed of the task, and the length of 
the workday must be coordinated with the worker 's capacity to 
resist fatigue. Virility of body and alertness of mind go together. 
The strength of creative desires varies directly with mental and 
physical vigor; the greater the surplus of muscular and nervous 
energy there is in people, the greater will tend to be the urge to 
creativeness. Hence the importance of a proper working environ- 
ment, of a minimum standard of physical health and mental com- 
fort for any community. It is necessary that the material and 
human aspects of industrial organization shall be planned with a 
view to eliciting the freest response of the workers, because, "The 
instinct of workmanship brought the life of mankind from the 
brute to the human plane, and in all the later growth of culture it 
has never ceased to pervade the works of man." 2 This trait, 
however, easily suffers repression, and it is the duty of industry and 
the community to safeguard it. 

The Acquisitive Desire. Of no less importance in the functional 
life of modern industrial society is the acquisitive impulse or the 
original tendency to assimilate objects and events to the ego or self. 
This desire is manifested in those ownership activities which are 
designed to give us possession or control of such things as bring 
some form of physical or mental satisfaction. Indeed, so large a 
part does this fundamental desire play in the life of modern civiliza- 
tions that capitalistic society is frequently characterized as an 
" acquisitive society," which is to say that its primary interests are 
in gain. Getting something for doing nothing is a far too common 
characteristic of every society which surrenders itself to an abnormal 
acquisitive complex. In such a social organization, wealth becomes 
the measure of greatness and the basis of social prestige and 
power. 

1 WATTS, op. cit., p. 198. 

, THCWFEIN, The Instinct of Workmanship, p. 37. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 103 

The constructive phase of acquisitiveness, however, cannot bo 
gainsaid; it is manifest as a natural trait in the individual when, even 
in childhood, he becomes a collector of all sorts of things, not always 
of any apparent usefulness. Possession of things tends to give 
one a feeling of importance in the social and economic order, 
whether that order be the limited gang of playmates in childhood 
or the complex structure of modern economic society with its 
partnerships and joint-stock companies. Aristotle sensed this 
long ago when he observed, "how immeasurably greater is the 
pleasure, when a man feels a thing to be his own; for the love of 
self is implanted by nature. . . . " l Acquisitiveness is thus a 
powerful incentive to activity; one which must be recognized by 
those who would retain intact the existing order of things, as well 
as by those who hope and plan for a now social structure in which 
this impulse supposedly will be relegated to a subordinate position. 

The desire for wealth is not the only form of expression of the 
native tendency to acquisition. Most persons have a desire for 
individual ownership of things, for personal possessions and material 
advantage which yield pleasant experiences. In conjunction with 
another common trait, the tendency to self-expression, the instinct 
of ownership leads workers to identify themselves in an intimate 
way with their tools, equipment, and machinery. This is due 
partly to the fact that we are more confident in dealing with what is 
familiar than in handling strange material and equipment. The 
typist works better on the machine she habitually uses than upon 
a succession of others equally good or even better, but strange. 
Of even more significance is another fact, namely, that we grow 
fond of what we use constantly and so take better care of it. Thus 
we acquire a sense of proprietorship. 

The acquisitive impulse is a highly important factor in problems 
of personnel administration. Innumerable instances appear in 
industry where a worker develops a sense of ownership in the 
machine which he does not in reality own, but which he has tended 
for a long time. In one mill that came under our observation the 
management had recently scrapped a very old machine and replaced 
it with a new and better one which yielded larger income for manage- 
ment and the worker. Yet the operator had felt so keenly the loss 
of the familiar machine that for a long time his interest in his job 
lagged and his efficiency dropped. Changing men from old 
machines to new ones, or even to different machines of the same 
kind, frequently results in strikes. An indignant sease of injustice, 
1 JOWETT, BENJAMIN, The Politics of Aristotte, p. 34. 



104 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

often irrational, is aroused when management fails to consider this 
consciousness of ownership on the part of its workers. The old job, 
old machine, and old workplace are viewed as things belonging to 
men as really as their houses, wives, and children. Workers develop 
a sense of vested interest in their jobs. This explains the bitter 
attitude of unionists towards so-called " scabs " or strikebreakers. 
Strikers feel that the scabs are unprincipled intruders stealing jobs 
and depriving wives and children of necessaries and comforts. No 
amount of philosophizing about the strikebreakers' "right to work" 
can change this attitude and feeling. 

When the impulse of ownership is satisfied in a reasonable way, 
there is developed a respect for property. Under such circum- 
stances, sabotage and violent destruction of property diminish. 
A deepened sense of propertylessness or injustice breeds excesses. 
As a workman grows more prosperous in a material sense, the moro 
conservative and law-abiding he becomes. This is a fact well known 
to employers and revolutionary leaders alike. The propertied 
employee feels more secure and is opposed to disorder and revolu- 
tion. Ownership and responsibility breed conservatism. Even 
Karl Marx, the founder of modern scientific socialism, sensed this 
when he declared that the " workers have nothing to lose but their 
chains and a world to gain." The appeal of socialism is to the 
sense of propertylessness, of expropriation, of injustice. The 
current movement toward larger ownership and control of industry 
by the workers, whether emanating from progressive employers or 
the advanced wings of the labor movement, is the most mature 
and promising expression of this primal tendency to acquisitiveness. 
A landless peasantry is almost always a restless, revolutionary 
peasantry, and a propertyless industrial worker is usually suscep- 
tible to suggestions for the expropriation of the property-owning 
classes. "Poverty," said Aristotle, "is the parent of revolution 
and crime." 1 

Unfortunately, modern industry is so impersonalized and the 
amount of capital necessary to own an enterprise so great that the-re 
is little appeal to the desire for proprietorship and little opportunity 
for achieving ownership. In the period of craftsmanship, the 
worker's sense and claim of ownership in the product of his toil 
were given satisfaction. In the labyrinth of mechanical processes in 
modern industry, it is not possible for the worker to think or to 
speak of the product as his own. He has no basis for claims of 
ownership in any article. The article owes its existence to the toil 

1 Ibid., p. 40. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 105 

and skill of many persons and its sale to many others. The worker 
does not control the process of production, the sale of the product, 
or the income from it. Little wonder he feels that his remuneration 
bears no equitable relation to productive effort, that there is no 
incentive to labor with enthusiasm, and that there can be no spirit 
of joyful accomplishment in work. The failure to take into account 
the universal desire for ownership is but further evidence of the 
imperfect motivation of modern industry. The movements for 
employee stock ownership, customer stock ownership, and indi- 
vidual home ownership, so general in the United States, are a 
recognition of this basic desire. Profit-sharing schemes are an 
attempt to elicit the spirit of cooperation which emerges from the 
ownership impulse. 

Gregariousness. Gregariousness, or the herding tendency, as it 
is called, is the urge to stay with one's kind. Like numerous species 
of the animal kingdom, man seems to have an inborn fear or dislike 
of solitude and isolation from his fellows. Aristotle's observation 
that "man is naturally a political (social) animal" is substantiated 
in practically every phase of modern civilization. The herd con- 
sciousness is active when a child objects to leaving the congenial 
warmth of the family circle at bedtime and is reluctant to exchange 
loneliness in bed for the familiar fellowship downstairs. This 
same consciousness makes the night watch of the sentry a 
tedious and uncoveted duty, increases the popularity of work which 
assembles hordes of people in the great beehives of modern industry 
and business, and forces emigration from the isolated rural com- 
munity and the village to the congested city with its easy and free 
social intercourse. Human agglomeration continues in the great 
cities despite the fact that they are often too large for economic 
efficiency, adequate recreation, and proper sanitation. The trait 
of gregariousness probably explains why factory employment, 
though speeded up and paid low wages, grows more popular, while 
domestic and agricultural services are shunned. 

Man's mental reactions to his work cannot be explained com- 
pletely if he is regarded merely as a self-contained unit. Each 
individual must be studied in connection with the web of relations 
in which he lives and moves and has his being. " Throughout his- 
tory man has always found his chief means of self-expression in 
work that is of social value, and has never lived happily apart from 
some definite group to which he could voluntarily yield homage, and 
from which he might derive emotional satisfaction and inspiration." 1 

1 WATTS, op. cit., p. 167. 



106 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

The church, political party, trade union, guild, fraternal order, and 
occupational association all bear witness to this basic desire. 

Successful management of men is possible only when those who 
are responsible for the direction of industry take cognizance of this 
associational tendency of man. Conversation is a normal* channel 
of communication. In the factory, an undue amount of conversa- 
tion tends to hinder work, but the arbitrary suppression of it 
through rigid rules and regulations is not a solution of the problem. 
The way out must be sought in stimulation of interest in work 
rather than through the imposition of fines and penalties. It is an 
unwise employment policy to destroy the common medium through 
which men and women are united. In the factory, as elsewhere, 
conversation is a bond of unity. 

The herding impulse is the cementing agency responsible for 
labor solidarity. It is foolish to break down the herding tendency 
when it takes the form of unionism. In advanced countries, this 
expression of the gregarious impulse is accepted as a natural and 
healthy activity, a thing to be nourished rather than destroyed. 
This universal trait also makes for man's extreme sensitiveness to 
the opinion of his group and accounts for his susceptibility to mob 
action and hysteria. Fear of being cut off from his fellows, a 
situation that few individuals can withstand, is often responsible for 
support of a strike policy which does not have the inward sanction 
of the striker. Group solidarity is the basic factor in the motivation 
of strikes, as it is of the general lockout initiated by the employers' 
association. It is important to remember that in times of stress 
when men are forced to fight with their backs to the wall, uncon- 
scious sympathies are on the side of revolt, and reason vacates her 
throne. In a strike, each individual has a potential capacity for 
violence if the group wills it, and especially if the attitude and policy 
of the employer become an obvious irritant. This is not an 
extraordinary reaction, but the simple manifestation of man's 
susceptibility to suggestion, his sensitiveness to approval and dis- 
approval, his urge to imitation, and his desire for gain and advan- 
tage. He moves with the mob and acts with his group. Mass 
action is always an expression of the herding impulse; it yields 
devotion to the common interests and principles, and allegiance to 
the spirit and ideals of its kind. The employer's solution is not 
to run away from or to suppress the mass spirit, but rather to 
counteract destructive expressions of it by means of constructive 
and positive outlets. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 107 

Pugnacity and Rivalry. The impulse of rivalry is manifested 
in our competitive system of commerce and industry. It can be 
and is capitalized in attempts to increase efficiency. The danger 
lies in overemphasizing and overstimulating it to the neglect oi 
other motives equally valuable. The instinct of pugnacity is the 
prompting to fight; it is frequently expressed in activities to escape 
from restraint, to overcome obstacles, to counteract pain, and to 
counterattack. Anger and fear are the twin forces which stimulate 
pugnacity. Whenever the environment of the individual is such 
as to obstruct the free play of native tendencies or impulses, 
pugnacious activity tends to follow. In industry, the strike and 
the lockout are mediums of expression for this impulse. Caught in 
anger, social modifications of conduct are often dispensed with, and 
man functions in primordial attack or defense. Employers fight a 
hampering union; unions fight a dictatorial, czaristic employer. 

Throughout history this impulse has been the basis of mass 
revolts and revolutionary movements. The story of manual labor 
is a long record of suffering and oppression, broken occasionally in 
the past by such incidents as the Peasants' Rebellion in England, 
the Peasants' War in Germany, the French Revolution, and the 
Russian Revolution. All class struggles have derived their motive 
power from the fighting urge socking an opportunity for freedom 
of expression for the inborn desires of the individual. The fighting 
impulse in human beings, however, can be directed into constructive 
channels. Many employers have discovered these channels and 
instituted systems of rivalry and friendly competition among 
workers. Successful direction of this impulse is possible only after 
the working environment has been improved so as to elicit the 
cooperative response of the worker and prove to him conclusively 
that a spirit of justice pervades employment policies. 

Whenever the ordinary channels of instinct manifestation are 
blocked by persistent opposition to all the claims and desires of the 
workers, the instinct takes on a " fighting form with the potential 
support of all the emotional energy of the personality, or it sinks 
back defeated, leaving the workers disturbed and irritated, and in 
ripe condition . . . for falling under the influence of others who are 
discontented." 1 When industrial discontent takes the tangible 
form of the strike or sabotage, the employer usually endeavors to 
persuade himself that such unrest is the result of the vicious and 
arbitrary interference of the walking delegate or professional 
1 Ibid., p. 164. 



108 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

agitator, who constantly seeks to insure his tenure of office by 
starting something and getting the men a new advantage. This is 
often the case. But it is more often true that conditions in 
the establishment are such as to make the workers susceptible to the 
influences of these so-called "outsiders," and honest scrutiny of the 
working environment may reveal the true irritant which must be 
removed if there is to be a healthy state of mind and enduring peace. 
There is experiential basis for the belief that industrial workers will 
seldom revolt against an employer whose employment policies and 
practices are founded upon principles of fair play. 

The Play Impulse. Each individual possesses a natural bent to 
engage in activity which has apparently little or no conscious pur- 
pose, but, in the mad rush of modern industry and business, it is 
often denied expression. Students of the psychological problems 
of modern industry have discovered that the play and creative 
impulses are closely related; that the latter probably originates as 
a specific differentiation of the former, manifested when the indi- 
vidual possesses an abundance of physical and mental energy over 
and above the ordinary requirements of life. Because of their 
intimate connection, any attempt to divorce permanently play 
and work is fundamentally artificial and injurious. Work which 
is generally constructive will always occupy the play energy of all 
normal individuals engaged in it, just as favorite games stimulate 
the athlete to spontaneous exertion. The normal athlete will 
always put considerable hard work into his favorite games. The 
fact that a large proportion of the people today appear to find no 
play and fun in work is not proof that these two impulses are not 
closely related, but rather that there is an evident maladjustment in 
our economic organization which precludes the happy alliance of 
these dispositions. 

The great mass of industrial workers seek in play and recreation 
an escape and relief from the suppressive influences of modern 
life. None will dispute that the spirit of joyful accomplishment 
is absent from the average industrial enterprise, and that there is 
evident maladjustment between the worker and his job. It is 
common knowledge that many men seek relief in drinking, sexual 
excesses, gambling, and other activities which conduce to physical 
degeneracy. The constant nervous and physical exhaustion which 
the worker suffers would prove too great a strain were it not for 
certain avenues of escape. Even in the movies he finds his interest 
stimulated without heavy demands upon his reason, memory, or 
judgment. Recreation and amusement are spiritual nourishment 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 109 

to the routine worker who has no occasion or ability for heavy 
mental activity, whose days are spent in repetitious work involving 
neither responsibility nor judgment. 

The workers are often summarily condemned for their excesses, 
which are not more offensive, but less concealed, than the excesses of 
their more comfortably fixed fellows. One must remember, how- 
ever, that excesses are frequently the defense mechanism against 
something which is intolerable, against conditions which balk 
fundamental elements of human nature. It has been observed by 
someone that the low-grade amusements of the people point to 
something wrong with the existing scheme of things and indicate a 
passing of older forms of creative self-expression; that these violent 
play reactions are pathological protests against the drab monotony 
of existence. 

Experience in the administration of industrial relations suggests 
that play and work need not be divorced. Ways and means of 
satisfying natural traits and emotions are being found. By improv- 
ing the worker's opportunity for healthful recreation, his leisure 
time will be made more profitable, mentally and physically, and his 
increased vitality will to some extent be spilled over into his work. 
In providing facilities and opportunities for play and recreation in 
industry, it must be recognized that such action may involve unde- 
sirable limitation of the workers' circle of experience and social con- 
tacts. Moreover, even the spending of leisure is an art which must 
be learned, and many have not the intelligence or will to learn it. 

Self-assertiveness. Self-assertivonoss, also described as self- 
display, mastery, domination, vanity, and ostentation, is the 
characteristic human desire for distinction; it is the urge to rise 
above the dead level of mediocrity, to build better than the average 
of one's fellows, to develop outstanding individuality. In common 
with all other impulses, the degree of intensity of this urge to 
achievement varies with individuals. There is a desire in every 
normal individual for admiration and applause, and it may lead to 
great expenditure of energy in the hope of impressing one's person- 
ality on one's work. It explains the swarming of youths to Holly- 
wood in search of screen careers no less than the unprecedented flood 
of students to colleges and universities, correspondence schools, and 
night schools. Almost everybody wants to be somebody, and 
somebody a little better than any other body. This desire for 
leadership and mastery is often sought as a means to the gratifica- 
tion of other desires, but in many cases special satisfaction is found 
in leadership and mastery for their own sake. 



110 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

The urge of self-assertion or self-display is closely related to the 
desires for rivalry, approval, workmanship, and ownership. The 
worker's automobile, phonograph, piano, radio, and home are not 
the exhibition of senseless extravagance, as is contended by those 
who would deny to others what they themselves covet and acquire, 
but rather an outward and visible sign of an inward feeling of 
worth and superior status. In present-day industry the genius 
and talent of thousands of workmen lie buried because the managers 
understand so little about the psychology of the worker as to deny 
opportunity for self-expression and self-assertion. The tendency is 
to suppress individuality and to encourage or force a spirit of 
docility, meekness, and sheepishness. The presence of hordes 
of alien laborers, ignorant of the English language and economically 
impoverished, has been a factor making for the suppression of 
individuality in American industry. The spirit of self-assertion 
and self-display can be harnessed for constructive use. 

Disastrous results are in store for the civilization which mecha- 
nizes industry to a point where but few think while the many 
sheepishly and contentedly obey. The loss of initiative, of the 
spirit of achievement, of will power, and of self-respect are the 
inevitable consequences of extreme mechanization coupled with an 
administrative 'policy of suppression. "To take from men the 
opportunity for exercising initiative and judgment on the score that 
such exercise hinders speedy production, without providing alterna- 
tive methods of self-expression along the same lines, is an affront 
to the instinctive nature of man.' n 

Finally, this spirit of self-assertion may take the form of demands 
for higher wages, a shorter workday, and improved conditions of 
employment; the men may insist upon a voice in the determination 
of shop rules, policies, and conditions, and the right to organize and 
bargain collectively either through company unions or independent 
unions. Such demands must be studied and considered in the light 
of reason and their relation to this fundamental desire to enjoy 
equality of opportunity, self-respect, and genuine self-expression. 

Submissiveness. Equally natural, but diametrically opposed 
to the desire for self-assertion, is the tendency to submissiveness or 
self-abasement. In many people the inferiority complex is pro- 
nounced; the tendency to submission overbalances the tendency to 
self-assertion. If the urge of self-assertion is the spirit which covets 
leadership, the urge of self-abasement is the spirit which desires to 
be led. Any industrial manager will testify that there are men 

Ibid., p. 182. 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 111 

and women in industry, as elsewhere, who apparently take pleasure 
in being supervised and bossed, who shrink from the assumption 
of leadership and responsibility, who labor strenuously provided 
someone else will direct, and who execute joyously that which 
others have planned. 

Submissiveness is sometimes born of fear, sometimes of admira- 
tion, and sometimes of downright inertia. Many fear the possible 
consequences of self-initiated and self-directed action. In others, 
submissiveness is closely associated with hero worship; the guardian- 
ship of a strong leader is greatly admired and preferred to inde- 
pendence. This accounts for the dramatic role of the dominant 
union leader who dares do things the rank and file will not and 
cannot do. All are ready to worship him, often regardless of the 
honesty of his purpose or the integrity of his methods. Union 
leadership, like all leadership, is founded upon the bent of self- 
assertion on the part of the leader, and of self-submission on the part 
of those led. Loyalty to an employer has the same foundation; it 
develops out of admiration for the achievements of captains of 
industry. Many concerns have sensed the importance of this 
and have purposely circulated printed and spoken stories of the 
founders and current leaders of the enterprise. 

Spontaneous submissiveness may be a healthy human reaction 
displaying a creditable reverence for deserving qualities and 
achievements; but if imposed and artificially cultivated it may 
become an undesirable reaction. If a dictatorial authority or 
bullying arrogance is used to humiliate and cow the workers, they 
may be made to feel insignificant, but in all probability not without 
the stimulation of a spirit of resentment, a feeling of injustice, and 
the stirring of dangerous emotions. On the other hand, industrial 
experience suggests that to treat workmen with the respect due 
them as personalities is to stir into life the spirit of loyalty and good 
will which is latent in the depths of every normal individual. This 
is an important consideration in the formulation and application 
of regulations governing shop and office conduct and the imposition 
of fines in the determination of which the workers have been given 
no voice. Disciplinary rules imposed from above cause irritation, 
resentment, and disobedience ; those sanctioned from below conduce 
to acquiescence, obedience, and respect. 

Sex and Parental Bent. The instincts of sex and parental bent 
are rarely recognized as having industrial significance, but the 
experiences of industrial life indicate that both these impulses are 
important factors in problems of scientific management. The sex 



112 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

urge is frequently suppressed in modern industrial life and, when 
not sublimated into activities which absorb both interest and energy, 
tends to find an outlet in undesirable practices and excesses. That 
the postponement of marriage on account of the inadequacy of wage 
scales adversely affects both the health and efficiency of the worker 
is a fairly generally accepted conclusion of special students of the 
psychological problems of industry. The increasing nervous 
energy necessarily expended by girls in modern industry, the speed- 
ing up of machine operators, low wages, and long hours of exhausting 
toil have been recognized as factors in weakened powers of resistance 
and consequent sexual excesses and loss of fecundity. The perver- 
sion of the sex impulse is often responsible for indiscreet conduct of 
male operatives working on the same shift as females and for a 
similar attitude of certain male supervisors of female labor. On the 
other hand, industrial managers have testified that it is still difficult 
to persuade female workers to wear overalls or other sensible clothes 
which conduce to safety and efficiency, because women operatives 
often desire to attract the attention of men. 

Measured in terms of sacrificial conduct, the parental bent is the 
most powerful of all the instincts. It is concerned mainly with pro- 
tecting and cherishing the young in the period of infantile helpless- 
ness and appears as a much stronger tendency in women than in 
men. Promotion of the interests and welfare of one's own imme- 
diate family is the principal purpose of this impulse, and it naturally 
results in the expansion of the self to include parents, wife, and 
children. 

Coupled with economic necessity, the parental urge explains the 
unstinted spirit of sacrifice which drives mothers into the factory 
and keeps them there despite accumulation of fatigue and adverse 
effects upon health. It keeps them there up to the utmost limits 
prior to childbirth and forces their return to work within a brief 
period following it. Department stores, offices, schools, factories, 
and mills are full of mothers who toil in order that their children 
may not only live but obtain larger educational advantages and 
achieve greater successes than have fallen to their own lot. The 
same native urge explains why many fathers tolerate undesirable 
conditions of employment and are patient with what would be 
for single men intolerable official attitudes and disciplinary measures. 
Many fathers and mothers in industry willingly consent to strike 
in the hope that the financial gains may provide greater comforts for 
their families, and many others eagerly embrace the chance to 
terminate a strike because they cannot bear to see their families in 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 113 

want of bare necessities. This impulse accounts for limitation of 
output in order to stretch work for the purpose of insuring sub- 
sistence for the worker's family. After all, a job means income, 
and income means food, shelter, clothing, and comforts. It is the 
parental urge also which compels the wage earner to direct his 
children into the professions rather than the trades and to covet 
for them opportunities denied himself. 

Sensitiveness to Approval and Disapproval. Closely associated 
with the bent toward creativeness and self-assertiveness and self- 
abasement is the tendency to obtain the approval of one's fellows 
and to avoid their disapproval. This sensitiveness to approval 
and disapproval is a significant force in group life. Individuals 
strike, toil, and sacrifice that they may win the plaudits of their 
kind. The appreciation and applause of the group of which one 
is a constituent member is often compensation enough even for the 
assumption of serious hazards to lirnb and life. 

If human behavior is influenced by the fundamental desire for 
approval, it is no less motivated by the natural propensity to escape 
censure. Men and women refrain from many practices which to 
their own minds appear legitimate, rational, and proper, just because 
the generally accepted standards of the group would thereby be 
violated and social disapproval would result. The ethical codes of 
organized societies could not survive were it not for the desire for 
social approval. The fear of social ostracism is a deterrent of 
antisocial conduct. 

In industry, sensitiveness to approval and disapproval has 
potentialities as yet scarcely discovered by executives. Hasty, 
harsh censure and discipline are frequently provocative of dis- 
content and antagonism. When, because of the arbitrary exercise 
of autocratic executive powers, workmen are severely chastised and 
punished by fines, demotion, or discharge, the invariable conse- 
quence is a growing mistrust and dislike of management mani- 
fested in ca' canny tactics, sabotage, lack of cooperation, and 
accentuated class consciousness. On the other hand, when criti- 
cism and rebuke are offered in a firm but friendly manner, such 
adverse effects are not so likely to result. Moreover, when credit- 
able conduct and achievements are recognized, appreciated, and 
applauded, there is a noticeable effect upon workshop morale, 
cooperation, and loyalty. 

Curiosity. The impulse of curiosity is the desire to investigate 
strange situations and manipulate new objects. As it appears in 
the average human being, curiosity is almost reflex in its simplicity. 



114 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

This impulse is closely associated with the creative tendency, and 
by some writers these two are presented as identically the same 
reaction. In the final analysis, curiosity is the desire to learn why 
things occur'and how things are done. 

Scientific managers with a clear perception of the value of this 
propensity have encouraged employees to learn the elements of 
manufacturing processes and the parts of machines. In this way, 
wider latitude has been given to invention and improvement, and 
enhanced efficiency has resulted. No attitude is more likely to 
increase waste and inefficiency than that which discourages workers 
from learning all they desire to know about processes and machines, 
and which is indifferent to their inquiries concerning the nature of 
operations. 

So long as machines are not under the control of those who 
operate them and operators have no interest in the process except 
the wage it yields, efficiency is impossible. Frequently workers 
neither understand the machines they operate nor care for their 
purpose. 

But if men understand what they are about, if they see the whole 
process of which their special work is a special part, and if they have con- 
cern and care for the whole, then the mechanizing effect is counteracted. 
But when a man is only the tender of a machine, he can have no insight and 
no affection, and creative activity is out of the question. 1 

The necessity for doing all that can be done to encourage 
expression of the impulse of curiosity arises from the dulling influ- 
ence which machine processes and division of labor have upon the 
mental faculties of the worker. No one has given us a better pic- 
ture of these effects than has Adam Smith. 

The man whose whole life is spent in performing a few simple opera- 
tions, of which the effects, too, are perhaps always the same, or very 
nearly the same, has no occasion to exert his understanding, or to exercise 
his invention in finding out expedients for removing difficulties which 
never occur. He naturally loses, therefore, the habit of such exertion, and 
generally becomes as stupid and ignorant as it is possible for a human 
creature to become. . . . His dexterity at his own particular trade seems, 
in this manner, to be acquired at the expense of his intellectual, social, and 
martial virtues. 2 

1 DEWBY, JOHN, Human Nature and Conduct, p. 144. 

2 SMITH, ADAM, An Inquiry in}o the Nature and Causes of the Wealth of 
Nations, Book V, Chap. I, p. 302 (Bohn ed.). 



PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 115 

This is an interesting observation by one whose philosophy of 
individualism has been so largely responsible for undesirable atti- 
tudes and policies in the management of labor. 

Fear, Flight, and Migration. Man has the capacity to be fearful 
under many varying circumstances, and to flee from conditions, 
situations, and experiences which appear undesirable and harmful. 
"Fear may become abject cowardice, prudent caution, reverence for 
superiors, or respect of equals/' 1 Moreover, to many human beings 
the coming of spring, after the sedentary and indoor life of winter, 
suggests migration to other areas of habitation. Students of 
migratory labor know how promptly and spontaneously hobo 
migration begins with the first warmth and sunshine of spring. 

Economically, the most important fear that obsesses the mind 
of the individual is worry and misgiving concerning the security 
of the future. Fearful forebodings relative to seasonal and period- 
ical unemployment and the loss of a job through unreasonable dis- 
charge have a detrimental effect upon health and efficiency. It is a 
common experience of the race that men tend to move away from 
conditions of economic insecurity and to migrate to areas of larger 
economic opportunity and security. This is the potent force in 
the constant flux and redistribution of workers so characteristic of 
labor turnover, as it is in the political plans and purposes of nations 
that seek an outlet for surplus population. 

The Function of Reason in Personnel Administration. The 
modification of the working environment offers a wide latitude for 
constructive manipulation of the human traits, that is, for their 
control, sublimation, and proper direction. Human behavior is 
constantly undergoing great modification under the influence of 
reason, intelligence, and socially prevalent habits which adjust the 
individual to the ways and requirements of the group. If cumula- 
tive change and adaptation were not possible both in the individual 
and in social and economic institutions, constructive industrial 
progress would be unthinkable. If man is primitively an untutored 
savage, trial and error, customs, tradition, and intelligence eventu- 
ally modify his original nature. 

The characteristic of man which differentiates him from the lower 
animals is his ability to learn readily from experience, that is, his 
degree of intelligence and reason, and his capacity consciously to 
acquire new habits. This ability is responsible for his tendency to 
suspend shortsighted emotional desires in favor of a reasoned 
response, often delayed, which yields satisfaction to several simul- 
1 DID WET, op. cit., p. 95. 



116 PSYCHOLOGICAL ASPECTS OF LABOR RELATIONS 

taneously stimulated desires at once. Out of this trait emerge 
the activities, conventions, habits, and morality of organized 
society. Emotion ever remains a potent factor in group unity, but 
the blind and unthinking instincts find a coordinated response or 
sublimation through the application of the balm of, reason and 
intelligence. Reason and conscious direction tend to supplant 
trial and error as the method of progress. Thus, as has been 
suggested, devotion to a person, principle, or cause will short-circuit 
all our pugnacity, constructiveness, curiosity, and submissiveness 
into a single channel of enlightened service. 

So great is the satisfaction derived from mental activity that 
some writers speak of thought as instinctive. Be this as it may, 
it is a generally known fact that many inventions and discoveries 
spring costless from minds thinking for the sheer joy of it. It is, 
therefore, a primary duty of society and industry to see that the 
individual's environment is not only such as to permit but positively 
to encourage opportunities for mental activity. One should recog- 
nize that all parties to industry have definite interests and ideals 
which must be rationally and intelligently guided, if industry is to 
escape the disastrous consequences of excessive indulgence in the 
emotional and explosive reactions of the primitive self. "We shall 
regress to the anarchism of elementary passion unless we can con- 
serve a working synthesis of the constructive interests of all engaged 
in industry." 1 

Progress in industry and employment relations is too much the 
product of accident, and too little the product of intelligent guidance. 
If the human race desires to assure continuity of progress, it must 
find appropriate stimuli for inborn instincts and devise intelligent 
ways and means of guiding them. As the instincts constitute the 
first great factor in culture, so modifications of instinctive behavior 
through intelligence and habit are the second. Original human 
endowment of instincts changes but little; habitual and acquired 
elements of human life change unremittingly and cumulatively. 
There is frequent conflict between instinctive and acquired modes 
of behavior of workers on the one hand, and the policies and prac- 
tices of scientific management on the other. These must be har- 
monized if industrial good will, peace, and efficiency are to be 
realized. 

1 WATTS, op. tit., p. 208. 



PART III 
THE TECHNIQUE OF SELECTION AND PLACEMENT 



CHAPTER VIII 
JOB ANALYSIS, SPECIFICATION, AND STANDARDIZATION 

Importance of Scientific Job Analysis. Two sets of information 
are essential for the successful operation of the employment division 
of any business organization. First, there must be available a con- 
siderable amount of knowledge concerning the requirements of each 
job, and second, there must be information with regard to the 
qualifications of individual workers. There is a tendency among 
employment departments to place greater emphasis upon the latter 
than upon the former. Often the responsibilities of selection and 
placement have been approached largely from the standpoint of the 
human factor divorced from the elements of the jobs to which 
the employees are to be assigned. Meticulous attention devoted to 
the art of reviewing, extreme care exercised in the development of 
application blanks and other paraphernalia of hiring, and assiduous 
experimentation with various kinds of character analysis and 
intelligence tests, all suggest that "man analysis" rather than 
"job analysis" has commanded the energies of employment man- 
agers. Perhaps this is as it should be, but there is every reason to 
believe that human analysis has little value for the employment 
department except in relation to specific positions. The necessity 
of analyzing jobs, as well as men, is rapidly becoming apparent, 
and employment managers are beginning to invade production and 
operating departments in search of data relative to the jobs to 
which they are constantly expected to assign new workers. 

Job analyses and the resultant job specifications are methods of 
precision; they are concrete descriptions and are indispensable 
requisites for thoroughness and accuracy in employment activities. 
Job standardization also has become an important technique in 
scientific management. Successful adaptation of the working force 
and effective competition are impossible without these aids. In the 
absence of the data which job analysis yields, proper selection 
and placement are inconceivable except by accident. Similarly, 
successful maintenance of the working force impinges at many 
points upon a thorough knowledge of the positions in which men 
and women are to work. No small amount of discontent and ineffi- 

119 



120 THE TECHNIQUE OF SELECTION AND PLACEMENT 

ciency in the workshop, office, and store results from dissatisfaction 
with jobs in one or several of their elements. There can be no 
significant quantity of good will in employment relations so long 
as serious maladjustments obtain in the relation of workers to their 
work. Maximum efficiency in production cannot be gained unless 
the one best way of doing the task is established through scientific 
investigation, followed by steps assuring the selection and training 
of the individual most able to complete the task that way. Job 
analysis enables the employment department to see each worker in 
relation to a specific type of work and to assure proper adjustment 
between the man and the job. Job specification sets forth the 
requirements of the task, and job standardization assures that the 
best method of completing the task will be effected by establishing 
and maintaining uniform standards and technique. 

The Meaning of Job Analysis and Specification. There are 
many economic advantages in a high specialization of labor. Adam 
Smith, writing in his Wealth of Nations in 1776, recognized three 
reasons why the division of labor increases production: It affords 
an increase of dexterity in every workman, effects a saving of time 
otherwise commonly lost in passing from one kind of work to 
another, and leads to invention of a great number of machines 
which assist the laborer in doing the work of many. To these 
three major advantages so ably drawn a century and a half ago 
can be added a fourth : Division of labor makes possible the use of all 
kinds of mental and physical equipments of mankind. This is 
true, however, only after both man analysis and job analysis have 
been completed. 

Job analysis and specification represent scientific attempts to 
"break down" the many complicated actions which are involved in 
the performance of a task, and to establish the proper way of 
employing human labor in the completion of the work. Thus job 
analysis can be said to consist of the discovery and interpretation 
of the component elements of a job, and specification involves the 
determination of the human qualifications required for its effective 
performance. The former necessitates a detailed study of the 
essential factors pertaining to the job (specific elements of the 
job), the modifying factors that surround it, the conditions govern- 
ing the worker's relation to it, the relation of the particular job to 
others in the organization, and the effect of its performance upon 
the health and general reactions of the worker. Naturally, the 
scope of the analysis will vary with the needs and purposes of the 
individual enterprise, but the dominant aim will always be identical; 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 121 

namely, the most effective adjustment of the worker to his work. This 
major purpose is suggested in the following standard definition of 
job analysis: "the determination of essential factors in a specific 
kind of work and of qualifications of a worker necessary for its 
competent performance." 1 When a considerable range of directly 
related jobs is covered the process is known as "occupational 
analysis." 2 

As the term job analysis is commonly conceived, its meaning is 
not identical with that of job standardization. Job analysis has 
to do with the anatomy of the job. Specification then outlines the 
human qualities and characteristics necessary to carry on the task 
to greatest advantage. Then follows job standardization which 
establishes mechanical facilities and techniques to be matched with 
the human element in order not only to effect but to maintain 
standards of efficiency in this technique with those individuals best 
qualified to do the work. As will be shown later in considering its 
fundamental uses, job analysis is frequently applied for the purpose 
of facilitating the selection, placement, and maintenance of 
employees, including the important functions of transfer and pro- 
motion. When so used, definitely related sets of information are 
stressed, including the nature and conditions of the task; the duties 
and responsibilities involved in its performance; the qualifications 
required in the worker; and such conditions of employment as 
pay, hours, privileges, opportunities, and undesirable features. The 
process of analysis followed in the collection, tabulation, and 
interpretation of these facts is referred to as "job analysis." The 
descriptive data which are yielded by this analytical process are 
known as the "job specification," especially when such descriptive 
statements are used in selection, placement, and employee follow- 
ups. 8 A combination of the specifications setting forth the human 
standards and those setting forth the physical conditions under 
which the work is to be done (the tools, speed, equipment, and all 
other facilities of work) make up "job standardization." 

Job analysis and specification are sometimes associated with 
time study, but these are not identical even though they contain 
many items of information in common. Time study usually has 
a very definite relation to scheduling and planning of work and is 

1 HACKET, J. D., Management Engineering, vol. IV, no. 5, p. 344, quoted in 
Cost and Production Hand Book, L. P. Alford, editor, 1934, p. 517. 

2 Sometimes referred to as "occupational description." 

8 See JONES, E. D., "Job Specifications," Federal Board for Vocational Edu- 
cation. Bulletin 45. 



122 THE TECHNIQUE OF SELECTION AND PLACEMENT 

concerned more with the technical nature of the job than with the 
relation of the job to the worker. It is thus an essential part of 
job standardization. In fact, both simple time study and micro- 
motion study 1 are methods by which job analysis, specification, and 
standardization can be made. Job analysis and job specification, 
however, are more directly concerned with those characteristics of 
the job that have an immediate influence upon the worker's relation 
to it. Much of the information gathered in time studies is too 
detailed and technical to be of great value in the selection and 
placement of employees, so is used as standards of work for proper 
training. On the other hand, job specification is more comprehen- 
sive than time study since it involves the establishment of standards 
made possible through time and motion study. Broadly speaking, 
job specification includes a general description of the nature of the 
task which is to be done; a statement of the primary physical and 
mental qualifications, education, and experience required in its 
operation; a summary of employment conditions, such as wages, 
hours, shifts, vacations, and possible lines of promotion; and other 
advantages and disadvantages with which new employees should be 
familiar. The various forms of time study are not concerned with 
such ramifications of information but tend to be confined to the 
more technical phases of the task. 

Development of Job Specification. Job specifications have 
emerged from the movement for greater standardization and 
centralization in employment procedure. As soon as the functions 
of selection and placement were centralized in the employment 
department, it became evident to many employment managers that, 
if departments were to do their work satisfactorily, it would be 
necessary to have accessible information concerning the nature of 
the jobs in the enterprise and the particular qualifications required 
for their successful performance. The origin of job analysis and job 
specification as instruments of precision in the standardization of 
performance, classification and grading of occupations, and selection 
and placement of employees, must, however, be traced to the publi- 
cations of Frederick W. Taylor, whose work has already been 
described in Chap. III. Here, as elsewhere, in scientific manage- 

1 Micromotion study is time study and analysis by means of a moving 
picture camera whereby every movement and all conditions of work are recorded 
on the motion-picture film. It is used in doing a piece of work, in the develop- 
ment in practical detail of the best manner of doing it, and in the determination 
of time required. (Cost and Production Handbook, p. 516.) Thus time study, 
as herein used, refers to both the stopwatch study and motion study involving 
photographic procedure, although often these two phases are treated separately. 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 123 

ment, Taylor did pioneer service. At present, however, the United 
States Department of Labor and the Employment Service are 
rendering signal service in the continuation of their Occupational 
Research Program on Job Descriptions launched in 1936. [ 

Since the publication of Taylor's Shop Management, in 1911, 
job specifications have gone through a considerable process of 
development. The first attempts consisted in the making of 
random notes, hastily jotted down, giving an informal description 
of individual jobs. These descriptions were too incomplete for 
satisfactory use in selection and placement and were even less 
satisfactory in the execution of transfer and promotion plans. In 
the hope of avoiding the defects of random notes the essay specifica- 
tion was developed. These essays, which were written by the 
worker on the job, the foreman, or someone in the employment 
office, were primarily descriptive statements in narrative form 
setting forth the nature of the work. Essay specifications met 
with considerable success. They not only presented more informa- 
tion than had hitherto been available, but also afforded a real 
opportunity for full expression on the part of those who were most 
vitally concerned. But this new method was cumbersome and 
consumed much time. The essays often rambled and were incom- 
plete. The busy employment executive found it impossible to 
locate quickly specific items of information which he desired in 
interviewing prospective employees. There was a conspicuous lack 
of uniformity in the descriptions of similar jobs. "The tendency in 
many cases was to draw an ideal picture rather than present a 
practicable workable minimum. As a result, information, other- 
wise very important, was made unusable." 2 

It soon became obvious that a more systematic procedure would 
have to be devised for obtaining information about jobs and for 
making this knowledge more readily accessible to employment 
officers. The result was the development of special forms which 
gave standardized information about the various tasks, specified 
particular items to be checked or indicated, and provided for a 

1 See, for instance, the exhaustive Job Descriptions for the Construction 
Industry, published in July, 1936, by the Division of Standards and Research 
under the joint supervision of the United States Department of Labor and 
the United States Employment Service. This is a part of the results of a 
research program which is to cover a complete job analysis of every industry 
throughout the United States. 

2 JONES, E. D., "Job Specifications," Federal Board for Vocational Education, 
Bulletin 45, p. 19. 



124 THE TECHNIQUE OF SELECTION AND PLACEMENT 

descriptive statement of duties and qualifications. The new plan 
retained the advantages of the essay specifications without its 
glaring defects. Information could be obtained quickly, there 
could be uniformity in both content and form, and particular items 
of information could be made readily accessible for reference. 
Moreover, there was still opportunity for a full discussion of impor- 
tant elements of the job. Improvement has continued, until today 
brief, complete, and clear job specifications are found in many 
establishments and can be used successfully even by an inexperienced 
interviewer. Standard forms which can be used in different occu- 
pations and in different plants have been designed, but there 
obtains considerable individuality in most forms because they have 
been developed to meet the needs of particular enterprises. 

Need for Job Analysis and Specification. In the small shop or 
office where labor turnover is insignificant and the employer is in 
intimate contact with his employees, there is no need for detailed 
analysis of jobs. When a vacancy occurs, the man who does the 
interviewing and the hiring is usually sufficiently familiar with the 
position to fill it successfully. Sometime in his experience with 
the company he probably has held that very job, or the ones 
immediately below or above it. At least his daily contact gives 
him fairly complete information concerning the requirements of the 
various positions so that he needs only to refer to a printed card or 
slip of paper for the necessary data. 

To a lesser extent this is true of the larger organizations in which 
the functions of hiring and firing are assigned to the foremen or 
departmental heads who are familiar with the nature of the jobs in 
their respective departments. Under such circumstances the need 
for job analysis and job specifications is not urgent. But with the 
transfer of responsibility for hiring and firing to the centralized 
employment department in charge of junior executives, high-grade 
clerks, or special employment managers, the collection and analysis 
of data concerning the various jobs and occupations in the enter- 
prise become imperative. It is impossible for the average inter- 
viewer to be familiar with all the details of all the jobs in a modern 
plant or office of any size. Consequently, department heads, fore- 
men, and other executives are asked to specify in considerable detail 
the requirements of different tasks. Standard job specifications 
make it unnecessary to call for these details over and over again 
as new men are hired for vacancies. Other conditions which 
make it expedient to introduce job specifications will appear when 
the purposes and uses of these instruments are considered. 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 125 

Despite the urgent need for job analysis, its adoption is not an 
easy matter. Many shop executives are not in sympathy with this 
phase of personnel administration. Managers of the old school 
view standardization in any form as wholly unnecessary and insist 
that it is far better to allow the informality of individual judgment 
in such matters as selection and placement. The making of a job 
analysis usually requires ability to recognize, isolate, and describe 
the various elements of each job, and the descriptive statement of 
these elements must be drawn up in clear and concise form. This 
may in part account for opposition to analytical processes. Shop 
executives are rarely trained to analyze and describe their own 
duties and the duties of their workmen, so many find themselves in 
difficulty when asked to make a job analysis. Standardization, 
however, is fundamental to the highest efficiency and greatest 
economy. In so far as job analysis and job specifications are 
essential to these ends, executives will be compelled to accept such 
procedure as an established part of the personnel program. 

Purposes and Uses of Job Analysis. The scope and method of 
job analysis will invariably depend upon the needs and conditions 
of the individual establishment and will be limited by the purpose 
which the analysis is to serve. Viewed broadly, job analysis may 
be introduced for one of two general purposes, or both. It may 
be directed toward improvement in technical efficiency, in which 
case a minute dissection of the job through time and motion studies 
will receive the major emphasis. Or, job analysis may be introduced 
for the purpose of perfecting the technique of hiring, in which case 
emphasis will be placed upon the more general specifications that 
aid directly in successful adaptation of new employees and the 
reallocation of old ones. These two general purposes are directly 
related in that the achievement of the one invariably implies at 
least partial achievement of the other, and both are fundamental 
in improving the general efficiency of, the whole organization 
through job standardization. Job analysis, however, may have 
many specific purposes in the comprehensive scheme of employment 
management. It is necessary to direct attention to some of these. 

1. The Use of Job Specifications in Hiring. For many com- 
panies job specifications have their greatest usefulness in the selec- 
tion and placement of employees. In setting forth the requirements 
of particular jobs and the qualities which the workers who are to 
fill them must possess, such specifications fill a pivotal position in 
the employment function by bringing together the right man and 
the right job. To the interviewer, job specifications are an impor- 



126 THE TECHNIQUE OF SELECTION AND PLACEMENT 

tant instrument, if not an indispensable one. Without them, 
intelligent interviewing is almost impossible and accurate placement 
is inconceivable. A clear description of particular units of work 
defines the job and provides an adequate basis for judging the 
fitness of an applicant. Equipped with the necessary information, 
the interviewer can present to the applicant a complete description 
of the nature of the work, the conditions under which it is performed, 
the duties incident to it, and the opportunities afforded by it. Not 
only is misplacement thus avoided, but misunderstanding is 
diminished. 

2. Job Specifications and Job Grading. The grading of jobs 
consists of the determination of their relative values in a department, 
a shop, or an entire plant. Job and occupational rating is usually 
accomplished in a haphazard fashion and frequently amounts to 
nothing more than crude guesswork. Careful, systematic analysis 
furnishes reliable information concerning the degree of skill and 
knowledge required in the job; the mental and physical effort 
exacted; the disagreeable conditions attending it; and the value 
of the product, materials, machines, and equipment. With this 
information available, it is a comparatively easy matter to deter- 
mine the relative importance of each job in any operating unit of the 
plant and its value to the entire establishment. 

3. The Relationship of Job Analysis to Wage Rates. Job grading 
makes possible job classification, which has been defined as "the 
segregation into groups, under common designation, of all positions 
requiring similar skill, training, or ability, and having approxi- 
mately the same relative value in the industry/' 1 Job classification 
is usually made for the purpose of standardizing wage rates. The 
inconsistencies in rates of wages for similar, if not identical, jobs 
and occupations in American industrial organizations present a 
curious anomaly, in view of employers' insistence that employees be 
paid according to their efficiency and service. Innumerable 
instances of glaring inequalities obtain, of which the following is 
typical: "In one department two typists are seated at the same 
table and perform exactly the same work. One receives $62.50 a 
month and the other $100 a month. A time study of the output 
proved that the employee receiving $62.50 a month performed more 
work each day by one-third than the employee receiving $100. " 2 
An employment manager in a large industrial plant has stated that 
in his organization there was a difference of from $20 to $40 a month 

1 Ibid., p. 59. 
* Ibid., p. 51. 



JO& AKALV&IS, SPECIFIC ATlOtf, STANDARDIZATION 127 

in wage rates of various departments performing practically the 
same kind of work. Other personnel officers have cited similar 
cases of inequalities and have confessed that it is almost impossible 
to remedy the situation by a thoroughgoing revision of wage scales, 
because the management displays no interest in job analysis and 
job standardization. Further discussion of these practices will 
be reserved for the chapter dealing with problems of salary control 
and wage standardization (Chap. XVIII). 

The effects of such inconsistencies in wage rates upon the per- 
sonnel are far-reaching. There is an undercurrent of dissatisfaction 
which encourages numerous requests for interdepartmental trans- 
fers, and, if transfer is denied, competent workers frequently go 
"shopping for jobs" in other plants. Even if the men remain with 
the company, there is no incentive to efficient service and the ten- 
dency is to withhold their best efforts. By providing specifications 
which form the basis for equalization of wage rates, job analysis 
eliminates this prolific source of discord and tends toward stabiliza- 
tion of the working force. 

4. Job Specifications as an Aid to Transfers and Promotions. 
Interjob, interdepartmental, and even interplant transfer of 
employees is a frequent necessity in any well-organized and intel- 
ligently administered enterprise. The reasons for this are set forth 
later. 1 Job study, with its resultant specifications, furnishes 
information which facilitates intelligent and equitable transfers. 

In a similar manner, job analysis contributes to the successful 
execution of a systematic program of promotions. A general plan 
of promotion which is not constructed on a foundation of specific 
and explicit specifications of positions in their proper sequences is 
foredoomed to failure. Men cannot be advanced from position to 
position presenting a spiral of responsibilities unless the nature 
and requirements of higher positions are definitely known. A 
careful study of jobs not only assures a correct line of advancement 
but frequently makes possible an escape from "blind alley" jobs 
by linking them up with positions in the same or different depart- 
ments which offer greater opportunities. 

5. Job Study and Employee Training. Transfer and promotion 
frequently necessitate special instruction and training of individual 
employees. It is difficult to conceive of a successful training 
program in the absence of detailed information relating to the 
various jobs in the establishment. Positions must be classified, 
indexed, defined, evaluated, and related if a systematic program of 

1 See Chap. XVI. 



128 THE TECHNIQUE OF SELECTION AND PLACEMENT 

employee training is to be maintained. Men cannot be prepared 
intelligently unless the nature, duties, and responsibilities of the 
jobs for which they are being trained are definitely described. The 
content of the training curriculum, length of the training period, 
and selection of candidates for training are alike dependent upon an 
adequate study of jobs. 

6. Job Specifications and Grievances. In a very real sense the 
transcendent purpose of job analysis and job specification is the 
equitable adjustment of grievances or their complete elimination. 
The preceding discussion has already suggested that an appreciable 
amount of unrest in industry is attributable to the absence of 
adequate information about jobs. Gross inequalities in rates of 
wages, failure to inaugurate a systematic plan of promotion, 
favoritism and injustice in the execution of transfers and promotions, 
inability of department heads to appreciate fully the intricacies of 
jobs, and lack of intelligent comprehension of human qualities, all 
create discontent that often develops into serious grievances. The 
volume of data obtained through job analysis sets forth clearly the 
conditions surrounding the task which may constitute the causes of 
the workers* complaints and objections. Because they them- 
selves are often unfamiliar with the minutiae of operations, managers 
are prone to regard protesting employees as perverse, unreasonable, 
obstinate, and emotional. Job description conduces to more 
accurate judgment. 

If, as is often urged, misunderstanding is the basic cause of 
industrial unrest, then, conversely, understanding should be the 
starting point in any program for industrial peace and harmony. 
Nothing promotes mutual understanding more than does accurate 
information about the jobs, their elements, and conditions. 

7. Job Analysis in Relation to Industrial Research. An impor- 
tant function of job analysis and job specification is that of aiding 
the program of research, which is assuming an important place in 
the administration of modern industry and business. Funda- 
mentally, job analysis and job standardization are service instru- 
ments; they are means to an end. The special service functions of 
job analysis and job specification in promoting the activities of 
industrial research are graphically presented in Fig. I. 1 The 
significance of job analysis in relation to scientific research in the 
problems of selection and placement, job rating and classification, 
wage setting and standardization, transfers and promotions, edu- 

1 Suggested by E. D. Jones in "Job Specifications," Federal Board foj 
Vocational Education, Bulletin 45, pp. 11, 12. 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 129 



cation and training, and the causes and adjustments of grievances 
has been suggested above. Detailed facts concerning structural 
and functional aspects of jobs, occupations, and trades are essential 
to the solution of these problems. 

A similarly intimate relationship exists between job analysis and 
special studies of time and motion elements; health and fatigue 
factors; causes of industrial accidents; and standards and methods 
of procedure in machine operation, adjustment, and maintenance. 



FUNCTIONAL RELATION 

OF JOB ANALYSIS 
TO INDUSTRIAL RESEARCH 




FIQ. 1. 

Occupational disease and fatigue have their causative roots in the 
nature of the job or its environmental factors, and an analysis of 
all causative conditions is fundamental to remedial action. A 
study of industrial accidents invariably involves an analytical 
study of the anatomy of those jobs that have a high accident 
frequency and severity rate. Only in this way can the hasarda 
peculiar to particular jobs and machines be uncovered and proper 
safeguards devised to reduce accidents. Special studies of time and 
motion elements in individual jobs are closely associated with the 
analytical process used in determining job specifications. So true 
is this that job analysis and time study are frequently identified as 



130 THE TECHNIQUE OF SELECTION AND PLACEMENT 

synonymous. Finally, it is only by the use of data obtained 
through job analysis that operatives can be instructed intelligently 
in the best methods of machine operation, adjustment, and main- 
tenance, and unnecessary wastage and breakage be avoided. Job 
analysis may appropriately be described as the first step in indus- 
trial research. 

An Outline of Job Analysis. If any one of the above purposes of 
job analysis is to be accomplished, it will be necessary to remember 
that such an analysis is a decidedly flexible instrument, adaptable to 
the specific problems of particular establishments or units of the 
same enterprise. The specifications desired will naturally vary 
with the needs, and the inquiries initiated by the job study will, as 
a consequence, manifest a similar lack of standardization. The 
importance of this fact necessitates its frequent reiteration, since in 
matters of personnel relations rigid standardization is seldom 
desirable, and uniformity of procedure and practice is not to be 
coveted. The following outline of a job analysis, therefore, is 
intended merely as a suggestion: 

I. Preliminary data: 

1. Name and location of department where the job is performed. 

2. Title and symbol of the job. 

3. Line of responsibility and control. 
II. Nature of the job: 

1. General characterization. 

a. Mechanical. 

b. Clerical. 

c. Selling. 

2. Nature of the work. 

a. Sitting, standing, or walking. 

6. Posture. 

c. Heavy, average, or light. 

d. Repetitious, monotonous, or varied. 

e. Clean or dirty. 

/. Inside or outside. 

3. Statement of duties and responsibilities. 

a. Major duties. 
6. Minor duties. 

c. Responsibilities regularly associated with the job. 

d. Responsibilities which are more or less irregular, occurring in 
periods of rush, emergency, or slack times. 

e. Interdepartmental duties and relations. 
/. Contacts with the public. 

g. Relation to other jobs. 
III. Equipment: 

1. Machine. 

2. Tools. 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 131 

3. Materials. 

4. Uniforms. 

5. Furniture. 

IV. Conditions of work : 

1. Hours of employment. 

a. Normal or basic working period. 
6. Time of starting and stopping. 

c. Lunch period. 

d. Rest periods and relief. 

e. Overtime requirements or opportunities. 
/. Sunday and holiday work. 

g. Day work or night work. 
h. Regularity of employment. 

2. Physical conditions of employment. 

o. Heat, humidity, and extremes of temperature. 
6. Light. 

c. Sanitation. 

d. Safety and occupational hazards. 

e. Agreeableness or disagreeableness of the work. 
/. Fatigue factor. 

g. Heavy demands on physical strength, eyesight, endurance. 
h. Work under stress or with comparative ease. 

V. Remuneration: 

1. Time or piece rate. 

2. Amount of pay. 

3. Time of payment. 

4. Method of payment currency or check. 

5. Regulations with regard to rate of pay for overtime, Sunday labor, 
night work, and holiday work. 

6. Fines for waste and breakage of materials, damage to equipment 
and machines, tardiness, and absence. 

7. Deductions for hospital, sickness, and other funds. 

8. Profit-sharing, bonus, and pension provisions. 
VI. Training provisions: 

1. Place of training on the job or in separate training department. 

2. Type of training. 

a. Oral instruction. 

6. Graphic presentation. 

c. Written instruction. 

d. Performance. 

3. Length of training or apprenticeship period. 
VII. Promotional opportunities: 

1. Place of the job in the organization. 

2. Ordinary lines of promotion. 

a. Understudy jobs. 

b. Related jobs. 

c. Advanced jobs. 

3. Frequency of promotion. 

4. Basis of promotion. 

5. Promotional plan in its functional aspect. 

6. Exceptional opportunities. 



132 THE TECHNIQUE OF SELECTION AND PLACEMENT 

Till, Qualification! required in the worker: 

1. Sex. 

2. Minimum or maximum age. 

3. Race or nationality preferred. 

4. Religious affiliation preferred. 

6. Physical size and strength desired. 

6. Degree of intelligence demanded. 

7. Kind and amount of technical training required. 
$. Degree of skill necessary. 

9. Educational requirements. 
a. Public school. 
fc. High school. 

c. Commercial school. 

d. College or university. 

10. Previous experience required. 

11. Personal qualities desired. 

0. Physical attractiveness. 
6. Pleasing personality. 

c. Neatness in appearance and dress. 

12. Special qualifications. 

a. Initiative and ambition. 
t>. Accuracy. 

c. Good hearing, eyesight, memory, voice. 

d. Ability to discover details. 

e. Speed. 

/. Carefulness. 

g. Honesty and integrity. 

h. Willingness to assume responsibility. 

1. Loyalty and coopcrativeness. 

/. Adaptability and dependability. 
k. Alertness, enthusiasm, aggressiveness. 
I. Fine sense of touch. 

m. Self-control and ability to get along with other people. 
n. Good handwriting. 
o. Leadership qualities. 
p. Good judgment, common sense, tactfulnesa. 

It is obvious that no one position in any organization will exact 
all of the above requirements, but each of these items, separately or 
in association with a number of others, will characterize the demands 
of particular jobs. From this extensive list, a job-analysis question- 
naire can be formulated with modifications to suit the needs of the 
organization. 

Method of Procedure in Making the Job Analysis. There is no 
universally applicable method of procedure in making the job 
analysis. The particular method to be used will depend upon 
various factors, such as the elements of the work to be emphasized, 
the length of time devoted tp the analysis, and the purposes for 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 133 

which it is designed. In many instances, the questionnaire method 
has proved successful. It involves the sending of a carefully formu- 
lated questionnaire to all employees who have not attained execu- 
tive positions. Accompanying the questionnaire is a letter from 
one of the officials of the company explaining the purpose of the 
survey and requesting the fullest cooperation from each worker. 
These requests for information are sometimes sent first to the 
departments which are best known to the job analyst and from 
which he can expect the best response. 

The questionnaire method has some shortcomings which cannot 
be overlooked and which have led many companies to use the com- 
mittee system. Employees, foremen, and other members of the 
working force do not like the formality of filling out a detailed 
statement, and are inclined to think of such a duty as so much 
unnecessary and impracticable red tape. Moreover, in the stress 
of duties both workers and executives have little time for careful 
scrutiny of the numerous questions contained in a questionnaire. 
For these reasons, it is better that there shall be organized a series 
of committees, comprising representatives of the personnel depart- 
ment and the rank and file of employees, to which shall be entrusted 
the responsibility of obtaining the necessary information. These 
committees are best placed under the immediate supervision of the 
job analyst, or whoever is in charge of the job analysis and occupa- 
tional rating in the organization. The cooperation of foremen and 
operatives on the particular jobs being studied is indispensable for 
the greatest measure of success. They are the ones most familiar 
with the peculiarities and requirements of particular units of work 
and so are best able to furnish accurate data. The task is not 
completed with the assembling of information. There still remain 
an analytical study of the facts secured about each job; interpreta- 
tion, classification, and correlation of these facts so as to construct 
an actual and reliable unit of measurement; and organization of 
information in such a way as to make it readily available for 
determination of standards of performance and pay. 

Particular attention must be given to the sources of information. 
Details are frequently overlooked by the employment manager and 
the job analyst, whereas such details are apparent to the worker 
who performs the task. On the other hand, the worker is inclined 
to lay too much emphasis upon certain elements in the operation 
and to attach too much importance to them. Often the worker 
does not understand or cannot explain intelligently certain parts of 
the job, so that the executive or supervisor in that department 



134 THE TECHNIQUE OF SELECTION AND PLACEMENT 

must be called upon to furnish the desired information. In order 
to get complete data it may be necessary to consult a large number 
of persons, including the master mechanic, efficiency man, spoilage 
clerk, safety man, physician, supervising foreman, and superin- 
tendent. Opinions must be checked in the light of actual observa- 
tion and care exercised to discriminate between facts, opinions, 
bias, and prejudice. Upon completion of the analysis it is well to 
submit the results to departmental heads and others capable of 
passing sound judgment on the accuracy of the specifications. 

Job-analysis data must be put into such form as to make them 
available for actual use in the organization. Considerable expense 
has been incurred in job analysis which never received practical 
application not because the data were inadequate or the company 
was unwilling to apply them, but because they were not analyzed 
and classified for use. Information was placed in the file or on the 
shelves to become antiquated. It must be remembered that jobs 
change, and, with the introduction of new methods and processes, 
old data become unusable. The actual construction of job speci- 
fications is imperative if job analysis is to be anything more than 
a mere fact-gathering venture. 

Illustration of Job Analysis and Occupational Rating. One of 
the most successful attempts to apply job analysis for the purpose 
of occupational rating has been made by the International Har- 
vester Company. The corporation had, in 1936, some 28 manu- 
facturing plants in the United States and Canada, giving work to 
about 45,700 employees. The operations include foundries, forge 
shops, woodshops, metal-working plants, iron mines, coal mines, 
timber lands, sawmills, railroads, steamers, and assembling shops. 
This diversity of industrial functions is as fair a cross section of 
American industry as can be found in any one organization, and 
the company's experience demonstrates the usability of job analysis 
in varied lines of industrial activity. 

Until a few years ago, no effort was made at standardized job 
analysis and rate setting. The absence of systematization resulted 
in a widely varied nomenclature and method in one plant as com- 
pared with another, and sometimes even among the different depart- 
ments of a single plant. No attempt had been made to establish 
relative values for various occupations. Piece rates had been set 
by men lacking in experience and were based upon the amount of 
money that would satisfy the employee rather than upon a quan- 
titative determination of the value of the job. No provision had 
been made for compensating pieceworkers for delays due to con- 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 135 

ditions beyond their control. It soon appeared that piece rates 
were extremely high and day work ridiculously low in comparison. 
These conditions are not peculiar to this company. They are 
typical of American industry. Although labor is a large element 
in cost, there is less means available for its accurate measurement 
than is the case for any other factor in production. 

It was apparent that such conditions did not produce good will 
on the part of the employees. A fair and reasonably accurate 
system of payment was manifestly necessary. But this was 
impossible without an analysis of jobs and occupations within the 
organization. Recognition of this fact resulted in the appoint- 
ment of an occupational rating committee with the manager of 
manufacturing as chairman, the manager of industrial relations as 
secretary, and the auditor of manufacturing, and certain works 
managers and assistant managers as members. Subordinate to this 
committee was a general committee comprising the assistant 
superintendent or planning head, the employment manager from 
each of the eight Chicago plants, and two members of the industrial 
relations department. This general committee made a preliminary 
job analysis and formulated therefrom job specifications by which, 
under names and numbers uniform for all plants, work of an iden- 
tical character was tabulated and catalogued under approximately 
1,000 titles or job categories. 

The supervision of job analysis in each plant was entrusted to 
plant committees consisting usually of the plant superintendent or 
his assistant, auditor, head of the planning department, employ- 
ment manager, chief timekeeper, and representatives of the 
employees 7 works council. These committcs cooperated with the 
foremen of respective departments. The analysis in each case 
was made on forms prepared by the general committee. The 
information sought consisted of the duties of each occupation, the 
qualifications required in employees for particular jobs, the out- 
standing undesirable conditions, hazards, and such matters as 
"safety first " precautions. From the data supplied by the plant 
committees, the general committee standardized and formulated 
job specifications for the 1,000 different occupations. 

The specification card for each occupation, a specimen copy of 
which is reproduced in Figs. 2 and 3, lists the occupation title and 
number; the extent of literacy, education, and physical character- 
istics required of the applicants; the nature and conditions of the 
work; personal tools required; kindred occupations; length of prior 
experience demanded; length of time necessary to train an inexperi- 



136 THE TECHNIQUE OF SELECTION AND PLACEMENT 

enced applicant; logical promotional opportunities; rating record; 
and other important items. The reverse side of the card is devoted 
to a description of the duties of the occupation and the necessary 
employee qualifications. The company has not found it necessary 
to revise this specification form during the past nine years since the 
analysis was originally made, and the methods originally employed 
also have remained unchanged. 

Every foreman is given a set of cards which includes all the 
occupations under his jurisdiction. Complete sets are furnished 
to the superintendent, physician, employment manager, auditor, 
and planning department. This occupational analysis and rating 
make possible accurate interplant and interdepartmental com- 



Job Name CABPJBNTZfc-AU. ROUND _ foK Rm. C- 4 


Departments 




GrouB N" 




gjMiJe QFtmilt ENGUSH 
jgj Roor g] Siand.ng 
[R| Bench QJ Silting 

03 Machine S Stooping 
Kindred Occupation 


DESIRABLE EMPLOYEES' OUALIFICATION8 
g]Spk jX]Ri tXjW"** SCHOOLING gjPubUc QHigh QTecho.cJ 
NATURE AND CONDITIONS OF WORK 
JgJ Hvyor Q QUM* Q Rough Q Hot Q Durt 

|XJ Medium Q MOTofo^om a * E OulM ^ D Fume * 
E) Light Q Dtngerimf S Exaetm* Mont' Q Acid* 


QUqivertny 
Q Greasy 


Machine Toots Operated 


SEF QUA 


LIPICATJON No. i 




Personal Hand Tools Req U| red .-.KIT 
Approximate time required to train an 

Q Day rrork Job Q P,c work job 
Day Q houf 


OF CARPENTER'S TOOLS 




inrvrvrlrnrH *-mplr>y. fn Ho fhi-5 work 




RATE DATA 




hou, 


week 'ft 
















Bin P hoof t 




A ( 1) h 00 ' f 




fj <ty 




P^c ew xkQday ^ 




nv ,D W '* X 




C>"uM[. rjweek 




Remarlca , . ,. 



















FIG. 2. Job specification card (obverse). 

parison of wages, which clearly differentiates skilled from semi- 
skilled mechanics and prevents overvaluating and undervaluating 
of occupations resulting from the use of incorrect titles. 

The Commonwealth Edison Company of Chicago 1 has laid 
particular emphasis upon the importance of job analysis and 
specification. At present the company is engaged in a reclassifica- 
tion program which is administered by a " management com- 
mittee" responsible for wage and salary control and other matters 
of employer-employee relations. Detailed operation of this pro- 
gram is in the hands of a " reclassification staff" under the general 

1 This company is a large power and light producer employing approximately 
9,000 persons. The Commonwealth Edison Company and the Commonwealth 
subsidiary corporations extend service throughout an area of over 200 square 
miles which contains over 3, 100*000 people. 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 137 



direction of the management committee. Executives and depart- 
mental supervisors participate in this job-analysis program by 
submitting "position" specifications with recommended titles and 
rates of pay and by drawing up organization charts showing the 
respective positions and rates of pay among other employees within 
the departments concerned. 

With this information before them, the reclassification staff 
classifies all of these specifications and watches carefully for possible 
combinations of positions with similar duties and qualification 
requirements irrespective of departmental lines. The staff further 
develops the functional services of the company, such as sales, 
trades, technical, clerical, and the like, and allocates position 



Job Name CARPENTER ALL ROUND 


fob No C-4 


THE DUTIES OF THIS JOB ARK: 

To do general inside and outside CWpcoter'* work on repair 
and oew conitruction job*. 


THE NECESSARY EMPLOVCf QUALIFICATION* TO fltC 
TMI8 JOB ARE: 

<1) Must be thoroughly experienced "alt round" carpenter, 
farnihar with all kinds of bench and construction work, 
capable of working to samples, drawing* and instruc- 




tions, interpreting mechanical requirements and figuring 
necessary dimension*. 




(2) Must be Jk.lled in the use of all modern carpenter', hand 




and planers. 




concrete form work, sish. doors, frames and roofs, also 




fitting and banging door* and sash. 




cabinet making and also roofing practice uiirtg tin. tar 




piper, shingles or tar and gravel 
<S) It is also desirable that he have some knowledge of 




(6) MuaTb'e 'aT n ct,vc. ca3 g workma n O . rS pos*essine good 




eyesight, observing to avoid accidents, physically strong 
and able to endure outside weather conditions 




be familiar with the construction of safe scaffolding 




be capable of directing helpers. 


Rrm8 T k K 













FIG. 3. Job specification card (reverse). 

specifications to their proper functional services. Then all position 
specifications within each functional service arc graded and rated 
by means of a rating scale now in process of development. After 
this has been accomplished, a simple graph is prepared for each 
functional service, based upon the ratings and rates paid positions 
in each service. These are used in the development of pay schedules 
which are built up by considering all relevant factors: 

1. Pay schedules recommended by departments. 

2. Service graphs. 

3. Company payroll and personnel policies. 

4. Labor market conditions and prevailing rates of pay- 

5. Cost of living. 

The reclassification staff, having completed its major task, 
finally presents this completed reclassification program to the 



138 THE TECHNIQUE OF SELECTION AND PLACEMENT 

respective departments for position-specification and pay-schedule 
approvals, and then the recommended program is passed on to the 
management committee for authorization and application. 

In the Commonwealth Edison Company, specifications for 
classified service positions are intended to record a clear idea of 
what each class position represents, to set forth the characteristics 
which distinguish it from other classes, and to give a definite mean- 
ing to the title of the class. There are six basic elements comprising 
a specification: 

1. The title or official name of the class. 

2. The statement of duties which describes the class in terms of responsibilities 
and duties, listed in the following order: 

a. Degree of direction or supervision received and the degree of super- 
vision exercised, if any. 

6. General statement of the duties, specifying the essential kind or 
kinds of work performed. 

c. A specific list of the characteristic duties of the position, in order of 
importance. 

3. The qualification requirements are to show only the distinctive or special 
qualifications which an applicant for the position must possess to enable 
him to perform the duties of the position, listed in the following order: 

a. Special education or training definitely required. 
6. Previous experience definitely necessary. 

4. The principal lines of promotion show the relationship of the position to 
positions of higher and lower rank in the same or closely related lines of 
work (not necessarily within the department). 

5. The immediate superior, by title. 

6. The salary range giving the minimum and maximum salary rates sug- 
gested for the class, and commission or bonus provided, if any. 

In preparing a specification for a class of positions, those respon- 
sible are reminded that all parts of the specification must be con- 
sistent with each other. For example, a difference in character 
indicated by the titles of two positions must be supported by a 
corresponding difference in duties and qualification requirements. 
Figure 4 presents a sample form of the company's position 
specification. 

Advantages Accruing from Job Specification. A great many 
advantages may accrue from job analysis and job specification, 
some of which have been suggested already in discussing the func- 
tions of these instruments. Wage earners have often opposed job 
analysis on the ground that the results have been used to cut wage 
rates and speed up operations. For this reason, it ha not always 
been possible to obtain complete information about the best 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 139 

methods of performance. Skilled workmen, especially, have 
jealously guarded short cuts and easier methods of doing their 
work. Despite their opposition, there is reason to believe that the 
workers obtain real benefits from job analysis. It determines and 
defines standards of work expected of them and specifies the definite 
requirements of the task, so that they can readily see what qualifi- 
cations are essential to successful performance. This precludes the 
placement of workers in jobs for which they do not have the requisite 
physical and mental capacity and technical training. By sim- 



SUPERVISOR, BOOKKEEPING Customers Accounts Department 

DIVISION Bookkeeping Division 

3M (Number and sex of employees) 
DUTIES: 

Under general supervision, to have responsible charge of the activities of an 
assigned group of employees in the Bookkeeping Division of the Customers 
Accounts Department; to plan, direct, and check the work of the group; to be 
responsible for the training and proper placing of the employees in the group; 
to handle unusual or difficult cases; to check and analyze production and error 
reports; to make suggestions and recommendations for improvements in 
department manual and routines; and to do related work as required. 
QUALIFICATIONS : 

One or two years' systematic training in accounting; several years' experi- 
ence with the Company on bookkeeping operations, two years or more of which 
shall have been in some senior or supervisory capacity; demonstrated ability to 
plan, apportion, and supervise the work of others. 
IMMEDIATE SUPERIOR: 

Assistant Revenue Accountant 
PRINCIPAL LINES OF PROMOTION: 

From: Work Dispatcher, to: Assistant Revenue Accountant 
SALARY RANGE: 

Minimum : Maximum : 



FIG. 4. Sample form of position specification. 

plication of the task, job analysis tends to make mastery and 
performance easier. In standardizing rates of wages for similar or 
identical occupations, job analysis protects competent workmen 
from the injustices which obtain under inequalities. Because it 
makes possible clearly denned lines of advancement and promotion, 
job specification furnishes an incentive to the workers. When 
specification reveals the hazardous characteristics of particular 
jobs, it aids materially in safeguarding the workers' health and life. 
Moreover, adequate data are provided for the elimination of these 
and other disagreeable features of the task, the adjustment of hours 
to the exactions of the work, and the general improvement of 



140 THE TECHNIQUE OF SELECTION AND PLACEMENT 

physical conditions of employment. Many of these benefits are 
indirect and workers seldom appreciate their significance. 

The advantages to management are probably more apparent. 
The efficiency of the whole organization is enhanced through 
standardization of operations. The work of selection and place- 
ment is greatly aided, which permits something approaching 
scientific precision in bringing the man and the job together. 
Unnecessary loss of time, motion, and energy is eliminated when the 
constituent elements of an operation arc analyzed and described. 
The planning and scheduling of work are facilitated. The duties 
and responsibilities of each job are clearly defined. This avoids 
the common tendency to shift responsibility. Valuable data arc 
furnished for the systematic development of promotion and trans- 
fer plans and other readjustments in the working force, such as the 
substitution of female for male labor and the placement of a certain 
percentage of physical defectives. The employer invariably 
stands to gain from a sound classification and standardization of 
occupations, the data for which are obtained through an analytical 
study, since this removes a chronic cause of discord. 

A study of a number of firms employing some 14,000 employees 
and engaged in similar or correlated linos of work revealed the fart 
that about 204 different names were used in reference to trades that 
could have been covered by twenty-nine standardized classifica- 
tions. It was also found that after job analysis had made possible 
standardization of job nomenclature, requirements, and rates of 
pay, the percentage of labor turnover was reduced. Job analysis 
promotes better understanding between foremen and the employ- 
ment officer because it teaches the former the importance of the 
human factor in production, and the latter the necessity of recog- 
nizing the mechanical factor. Finally, job specifications provide a 
basis for a more intelligent and sympathetic understanding between 
management and employees, by eliminating the causes of grievances 
and by furnishing a factual basis for the adjustment of complaints. 
In so far as this encourages industrial peace, it may also be stated 
that the community receives an appreciable advantage from the 
application of job analysis and job specification. 

An example of the practical results of job standardization is 
to be found in the recent experience of several of the largest Ameri- 
can tire manufacturers. During the 4-year period from 1928 to 
1931, inclusive, the productivity record of six plants then produc- 
ing about one-half of the total American output was: 



JOB ANALYSIS, SPECIFICATION, STANDARDIZATION 141 





Output per man-hour 


Vonr 






No. of tires 


Weight, pounds 


1928 


1.05 


20.97 


1929 


1.07 


22.80 


1930 


1.14 


26.17 


1931 


1.37 


30.67 



In explaining this remarkable increase in production, it is 
stated that 

The greatest annual increase was during 1931 amounting to 20 per cent 
in number of tires, and 17 per cent in combined total weight of rubber, 
chemical ingredients, and fabric. Among the technological changes which 
caused this rise in man-hour productivity may be mentioned the sharp 
reduction in labor turnover in the plants, the elimination of the less efficient 
machines, and less efficient workers, and the introduction of the so-called 
motion-time studies in several of the plants included in the survey. The 
motion -time study consists in analyzing to the minutest degree the individ- 
ual movements and operations each worker is required to make in the 
process of performing his or her task. The workers are then instructed to 
follow precisely the requirements set in the time analysis, thus eliminating 
a large proportion of what is known as waste motion. Automatic machin- 
ery and especially automatic conveyors are geared to the standard of 
output set for the workers around the machine or conveyor. It is frankly 
admitted by the managers and engineers in charge of operations that during 
the last year (1931) these motion-time studies have been, more than any 
other factor or factors, responsible for the increased output per man-hour. 1 

The Job Analyst and His Qualifications. Job analysis is essen- 
tially a planning function. Whatever may be its immediate 
purpose, its ultimate aim in most plants is to improve the technical 
efficiency of the whole organization. Consequently, it is normally 
undertaken by the planning department, if there is one, or by a 
specialist in job study. The position of job analyst calls for broad 
qualifications. A personality which commands respect is a primary 
requisite, since it is necessary for the job analyst to win the con- 
fidence of department heads and employees with whom he must 
come in contact. Skill and tact in approaching and handling people 
are thus essential. Indeed, the job analyst must be somewhat of a 

1 Monthly Labor Review, vol. 35, no. 6, pp. 1258, 1267, quoted in Cost and 
Production Handbook, p. 581. 



142 THE TECHNIQUE OF SELECTION AND PLACEMENT 

diplomat, maintaining a friendly attitude toward heads of depart- 
ments and workers alike and avoiding the development of antago- 
nism and suspicion. The work of job analysis is slow and tedious 
and the results are frequently tardy in developing. Consequently, 
patience is required to forestall premature discouragement. An 
analytical mind, impartiality of judgment, keen powers of observa- 
tion, thoroughness, and common sense are necessary. In addition 
to these characteristics, the job-study man will find considerable 
education, technical training, and experience indispensable to 
success. 



CHAPTER IX 
RECRUITMENT OF PERSONNEL 

Importance of the Supply of Labor. Every sound organization, 
whether commercial or otherwise, must be built in full recognition 
of the importance of the workers that are to become a part of the 
organization. A business enterprise may have the finest office, 
plant, and equipment obtainable; it may have millions of dollars 
in working capital; these are useless unless the owners have access 
to a well-trained, intelligent, and loyal supply of laborers. 

Because the workers of practically every establishment are in 
a state of constant flux, the problem of personnel recruitment is a 
permanent one. In every public and private enterprise, there is a 
perennial shift in personnel due to voluntary quits, discharges, and 
layoffs; forced separations on account of illness, marriage, and 
death; transfers and promotions; and additions for purposes of 
expansion. Thus, a veritable stream of employees passes in and 
out of the service of every organization, the volume and flow of 
which is dependent largely upon the intensity of business activity 
and the type of labor administration that exists in the organization. 

Since this constant flow in and out means much in terms of 
expense and profit, every employer is seriously concerned with two 
chief factors: (1) the source of the labor supply, and (2) the rate at 
which recruitments must be effected in order to maintain an effi 
cient supply of workers. In order to assure an adequate supply, 
it is necessary to follow the stream of workers back to the head- 
waters or original sources, that is, to the places from which come the 
men and women who seek employment. It is a stream of many 
tributaries, in the flow of which there arc all sorts and conditions of 
persons upon whom rest the responsibility of doing the world's work. 
Among them are varying degrees of intelligence, temperament, skill, 
and experience. They differ also in the no less important qualities 
of character, personality, ambition, initiative, cooperation, honesty, 
and devotion to duty. What manner of men and women these 
tributaries will yield for an industry or business often depends upon 
the source from which they arise. Careful and systematic contacts 
with desirable sources, therefore, are fundamental to scientific 
selection and placement. 

143 



144 THE TECHNIQUE OF SELECTION AND PLACEMENT 

Influence of Immigration upon American Supply of Labor. 

Until recently immigrants have come in an increasing stream from 
almost every country in the world to seek employment in the labor 
markets of the United States. Alien labor skilled, semiskilled, 
and unskilled has been a significant factor in our industrial and 
commercial expansion. In the century between 1830 and 1930, over 
37,000,000 people were added to our population through immigra- 
tion, and, today, approximately 28 per cent of our total white 
population are either foreign born or born of foreign parentage. 
In each of the years, 1907, 1910, 1913 and 1914, over 1,000,000 
aliens sought greater economic opportunity in this country. Even 
in the inevitable lull occasioned by the World War, an annual 
average of about 250,000 aliens arrived. In the years immediately 
following that great cataclysm (1919-1921), the yearly average 
rose to almost 500,000. Only since the depression period beginning 
in 1930, has this great external source of labor supply diminished. 
Still, there is scarcely an industry in the United States that does not 
have a large number of immigrant workers, and in many between 50 
and 80 per cent of the common laborers are foreigners. 

Recent years have witnessed a successful movement for more 
stringent regulation and limitation of the immigrant tide. On 
June 3, 1921, a temporary percentage law became operative which 
provided that the number of aliens of any nationality admitted to 
the United States in any one year as immigrants would be limited to 
3 per cent of the number of foreign-born persons of that nationality 
residing in this country, as shown by the census of 1910. The quota 
area included only Europe, Africa, Australia, and the Near East. 
Because of the numerous exceptions and exemptions provided by 
the law and the wholesale "bootlegging" or smuggling of aliens 
into the country, especially across the Mexican border, the new 
law was a disappointment to the restrictionists. More than 
706,000 immigrants were legally admitted in the fiscal year ending 
June 30, 1924. American employers, who had vigorously opposed 
the new policy of rigid restriction on the ground that it would 
destroy the common-labor market, were apparently reassured that 
the supply of alien workers would continue to be adequate. The 
American Federation of Labor protested against the manifest 
ineffectiveness of the new law, and, when the law expired by 
limitation on June 30, 1924, a more severe regulation was demanded. 

The restrictionists won a signal victory, and on May 26, 1924, a 
new and more stringent permanent measure was approved, which 
provided for complete exclusion of Japanese immigrants and fixed 



RECRUITMENT OF PERSONNEL 145 

the quotas from admissible sources at 2 per cent of the number of 
nationals of each of those countries resident in the United States in 
1890, as determined by the census enumeration for thafc year. 
Thus, under the new act, immigration from the whole world, with 
the exception of Canada, Newfoundland, Cuba, Mexico, Haiti, 
the Canal Zone, the Dominican Republic, and certain independent 
countries of Central and South America, has become subject to the 
quota limitations established by this act. 

The Immigration Act of 1924 has materially reduced the influx 
of aliens, since not more than 164,667 immigrants were admitted 
annually under its original quotas. The law provided that after 
July 1, 1927, the total annual quota should be approximately 
150,000. Present corrected quotas allow a total of 153,774 immi- 
grants annually into the United States, of which 150,275 are to be 
from Europe (126,000 from the northern and western sections), 
1,649 from Asia, and 1,850 from Australia, Africa, and the Pacific 
Islands. 

In the absence of this restriction, the tide of immigration during 
the postwar period would doubtless have reached or exceeded its 
prewar level. Of the 4,107,209 aliens admitted during the decade 
ending in 1930, 2,477,853, or 60.5 per cent, were from Europe; 
924,515 and 459,287, or 22.5 per cent and 11.2 per cent, respectively, 
were from the two nonquota countries of Canada and Mexico. 
The influx from these two latter countries has gained such momen- 
tum that there is still a strong movement calling for the extension 
of quota provisions to them also. While there seems to be no rea- 
son for the alarmist views expressed by many employers concerning 
the scarcity of labor, the years following the depression period of 
1929-1936 have demonstrated that more careful attention may have 
to be given to new sources of supply within the country and to 
scientific methods of selection, placement, and maintenance, if an 
adequate supply of labor is to be assured in. periods of industrial 
expansion. 

Considerable improvement in the administration of immigration 
laws, together with a recognition of the value of proper selection 
have greatly improved the type of labor gained through this channel 
This new system has also been made flexible enough to meet emer- 
gency labor conditions. During the early days of the great depres- 
sion it was found wise to discourage immigration into the United 
States as much as possible. Consequently, under a special presi- 
dential edict in September, 1930, prospective immigrants were 
prohibited from embarking for the United States if there was any 



146 THE TECHNIQUE OF SELECTION AND PLACEMENT 

likelihood that they might become wards of public or private 
charity. As a result of this action (still in force in June, 1938), 
immigration dropped from a total of 141,497 in 1930 to 54,118, 
12,983, 8/220, 12,483, and 17,207 in each of the succeeding years 
through 1935. 

Now that the time of an unlimited labor supply from Europe 
has passed, employers are giving more serious attention to problems 
of man power. The migration of negroes from the South to the 
manufacturing centers of the North; the movement of certain 
industries, as textiles, from New England to industrial centers 
along high power lines of the eastern seaboard; the increasingly 
large numbers of Mexicans who have come across the border to 
enter our agricultural fields, railroads, steel mills, and other 
important industries all indicate that efforts are being made 
to tap new sources of labor or to cultivate old ones more thor- 
oughly. Moreover, thoughtful attention is now being given 
to the problem of improving labor efficiency by means of scientific 
management, including stabilization of production, the installation 
of laborsaving machinery, and the application of enlightened per- 
sonnel practices, such as careful selection and placement of workers. 
The substitution of mechanical power for human energy will take 
considerable time, but scientific labor recruitment and maintenance 
offer possibilities of greatly increasing per capita production. 

What Recruitment Means, The restriction of immigration is 
only one factor determining the new attitude of management toward 
labor recruitment. A second factor is the conviction prevailing in 
the United States today that excessive hiring and firing entails an 
enormous economic and human waste. In any program outlined 
to reduce labor turnover, a position of primary importance must 
be accorded to proper recruitment, selection, and placement of the 
labor supply. Far too frequently, however, little or no attention 
is given to employees until they have become an integral part of 
the working force in the organization. There is an urgent need for 
policies that will lead to more careful location of plants and fac- 
tories, the discovery of adequate sources of desirable employees, 
and successful ways and means of tapping these sources. 

A solution of the problem of labor supply has its inception in 
proper localization of the plant. Factories are usually established 
in great centers of population or accessible suburbs where the 
necessary kinds of workers are available. Frequently, however, 
they are built in remote communities with the intention of getting 
away from the labor disturbances which constitute the perennial 



RECRUITMENT OF PERSONNEL 147 

nightmare of the city employer. These firms hope, of course, 
that workers will follow, weary of the congestion of the urban com- 
munity and desirous of the open air and the sunshine of the country. 
An excellent illustration of this trend toward decentralization is 
to be found along the rural districts of eastern North Carolina and 
Virginia where new textile mills and tobacco factories have been 
constructed in the open country; and at Hershey, Pa., where a 
whole modern community, including schools, stores, dairies, and 
homes, has been built around the Hershey plant. But workers do 
not always manifest a desire to exchange the gregarious possibilities 
of the industrial metropolis for the isolation and the seemingly 
more healthful environs of the small community. For example, a 
businessman who desired to establish a typewriter factory dis- 
regarded advice that he locate in the vicinity of Chicago and 
proceeded to build in a rural community of a neighboring state, 
taking with him his own employees. It was soon apparent that the 
workers gravitated back to the city, and the rate of labor turnover 
was so high that the project was eventually abandoned. It is 
necessary, therefore, to adopt a definite policy of locating plants 
and offices only where an adequate supply of labor is available. 

In formulating policies governing the recruitment of the labor 
supply, the following principles must be definitely established: 

1. The exact responsibilities and functions of the personnel department 
with regard to procuring employees must be defined. 

2. The company must have reached definite conclusions concerning the 
desirability of giving careful attention to problems of labor recruitment; the 
character, type, and kinds of workers desired; and its willingness to finance 
adequately the work entailed in establishing effective contacts with sources of 
prospective employees. 

3. The company must define its position with regard to the recruitment of 
relatives and friends of present executives and wage camera. 

4. The right kind of employment supervisor must be selected. A large 
amount of authority cannot be given the employment manager until he is 
familiar with the departments and classes of help needed. This means that he 
should be a man of broad experience and, wherever necessary, a man of special 
technical education. To practical experience must be added good judgment, 
tact, and common sense. 

5. The employment department itself must have a clearly defined policy, 
must prepare a workable type of application blank, devise the best ways and 
means of making contacts with labor sources, function always as the clearing 
house for all labor throughout the plant, be untrammeled by excessive rules 
and regulations, and be free from the necessity of giving employment to favor- 
ites of executives and employees. 

6. The establishment and maintenance of decent standards of employment 
good wages, reasonable hours, and safe and sanitary conditions are primary 



148 THE TECHNIQUE OF SELECTION AND PLACEMENT 

requisites of a successful recruitment policy. Moreover, honest representation 
of employment conditions, of the tenure of the position, and of the possibilities 
for advancement is imperative. Nothing so quickly destroys a company's 
reputation as misrepresentation or overrepreseiitation of positions. It is 
better to undersell than to oversell the job and the organization. 

The Community Survey. Standardization of the kinds of 
workers required and classification of available sources of supply 
are the essentials in the actual work of labor recruitment. Stan- 
dardization of types of jobs develops from job analyses and speci- 
fications, which were discussed in an earlier chapter. Classification 
of sources of labor is the immediate task of the employment office. 
In the organization of these sources the community survey is a 
useful instrument and, when supplemented by intimate knowledge 
of the labor market, makes for efficient recruitment. Some firms 
employ a social worker who canvasses employees 7 homes to list all 
children, together with their ages, school grades, and desirability 
as future employees. By means of this list, which is kept up to 
date, children are followed until they leave school and then are 
offered employment in the plant. Others through systematic 
tabulation of statistical data obtained through federal census, 
schools, and other agencies carefully analyze the present and poten- 
tial labor markets. Advertising is sometimes used in an effort 
to have young people invite a representative of the company to 
discuss with them and their parents the advantages of employment 
with the company. Care must be exercised here not to make 
offers of employment to children who should remain in school 
rather than be induced to enter industry prematurely. 

When concerns do make a community labor survey, the inves- 
tigation is not confined to young persons but includes a general 
classification of all available sources. The large industrial centers 
of the United States have more or less definite population areas or 
districts, divided on the basis of race and nationality. When 
systematically and intelligently charted, these sources can readily 
be tapped. Such a survey is an especially helpful preliminary to 
plant location and can easily be made through the medium of house- 
to-house canvass supplemented by consultations with school 
superintendents, teachers, clergymen, tradesmen, public officials, 
old residents, and charitable societies. 

Outline of Sources. From what has been said, it is evident 
that positions cannot be filled with well-qualified employees unless 
definite machinery exists for the systematic discovery, classifica- 
tion, and tapping of the divers sources of labor supply. Generally 



RECRUITMENT OF PERSONNEL 149 

speaking, these comprise: internal sources, such as present 
employees, stockholders, and friends of present executives and 
employees; and external sources, such as former employees, volun- 
tary applications, schools and colleges, advertising, labor scouting, 
private employment agencies, public employment exchanges, 
fraternal, religious, and benevolent institutions, union head- 
quarters, and the employment offices of other concerns. 

Present Employees. The present working force is the most 
immediate, convenient, and best source of recruits for vacant 
positions in any establishment. As a general policy, it is a serious 
mistake to take in employees from the outside when there are 
competent workers within the organization who are fully qualified 
to fill vacancies or who can, by very little training, prepare them- 
selves for such positions. Other things being equal, therefore, 
present employees should be accorded preference over outsiders. 
It is the policy of all progressive concerns to build up permanent 
employment and long service records by means of definite transfer 
and promotional plans which give present workers ample oppor- 
tunities for adjustment and advancement. In this way, workers 
who have been improperly placed are assigned to other positions 
more to their liking and for the performance of which they are 
better qualified, and efficient and loyal workers are promoted on 
the basis of merit. 

The filling of vacancies from among present employees, how- 
ever, necessitates sytematic records; otherwise, transfers and 
promotions will be made merely on an impressionistic basis and 
frequently on the basis of partiality and favoritism. Follow-up 
files, such as the qualification card and rating sheet, which are 
discussed in later chapters, are necessary instruments for the 
recording of data relative to experience, qualifications, growth, 
and progress. Promotional possibilities and the need for transfers 
are clearly set forth in these records. Provision is made for com- 
petitive examination, and all employees who feel that they are 
capable of higher and more responsible positions are encouraged 
to have their abilities tested. Service records should supplement 
whatever tests are administered, because it is only by such records 
that abstract qualities of character, loyalty, leadership, and 
dependability of the employee can be measured. 

Recruitment from present employees has some serious dangers 
if carried to extreme limits. A successful manager once said that 
he was glad to see men and women leave the service of his company 
because new employees brought into the organization greater 



150 THE TECHNIQUE OF SELECTION AND PLACEMENT 

assets in energy, attentiveness to duty, and enthusiasm than old 
employees took away. He added, moreover, that when employees 
left the organization it usually meant that they were going to better 
themselves. Such an attitude is extremely optimistic and totally 
disregards the costs incident to labor turnover. Nevertheless, it 
cannot be doubted that new blood is a valuable factor in the effi- 
ciency of an organization. Workers who have been in the employ 
of a company for a long period of years often possess the feeling 
that they can hold their jobs without reference to efficient service. 
Change provides a stimulus and may yield benefits to both employer 
and employee. There is such a thing as overs tabili zing the working 
force. New blood, however, is not necessarily good blood, and the 
best does not automatically flow to any given company. The 
progressive personnel department should, therefore, establish 
formal contacts with outside sources of labor supply in order to 
assure successful accessions to the working force. 

Friends of Present Employees. The friends of present 
employees are one of the most valuable sources of new workers. 
The productiveness of this source of supply is an acid test of the 
plant's popularity. Satisfied workpeople are the most valuable 
advertisement and recruiting factor a company can possess. If an 
employee likes his position, wage, treatment, and organization, 
he becomes an emissary of good will. Adverse reports and a bad 
reputation spread with equal rapidity. Good wages, decent con- 
ditions, fair treatment, and promotional opportunities constitute 
first essentials in a successful recruitment program. Some con- 
cerns, whose experience has proved this to be a most satisfactory 
source of new employees, encourage their workers to bring their 
friends into the service of the company by offering a cash bonus, 
provided the new employee proves satisfactory and remains with 
the company for a given length of time. Generally speaking, 
friends and relatives are likely to bring to the plant a correspond- 
ingly good type of worker. People like to work where they have 
friends and acquaintances and welcome an invitation to enter such 
plants. As a means of stimulating this form of recruitment, some 
companies occasionally distribute to their employees application 
blanks to be passed on to their friends. 

In recruiting from this source, certain precautions are necessary 
and are always taken by the best managed employment depart- 
ments. Favoritism and ill feeling can easily creep into such 
recruitment. Some companies will employ no one who has a 
relative in the organization in any capacity. This policy is adopted 



RECRUITMENT OF PERSONNEL 151 

to avoid the danger of favoritism and to escape the necessity, which 
is bound to arise, of hurting the feelings of employees whose rela- 
tives cannot be accepted because they do not meet the company's 
standards. Many companies, however, do not object to the recruit- 
ment of relatives, but insist that present employees who recommend 
friends or relatives fill out a blank stating the reasons why these 
individuals will make desirable additions to the working force. 
Every effort is made to cultivate a feeling of responsibility in this 
matter, so as to reduce to a minimum the danger of suggesting 
unsuitable workers. It is made unmistakably clear, moreover, 
that each applicant recommended by present employees will be 
subject to the same thorough interview and impartial scrutiny of 
the employment office as are given to workers recruited through 
other channels. With these precautions, there is little reason to 
fear that executives and employees will try to bring in undesirable 
and incompetent relatives or friends. 

Former Employees. Frequently employees are forced to leave 
the service of the company by circumstances such as illness, mar- 
riage, or family migration. The death of a mother often makes it 
necessary for young women to leave their regular employment for 
the purpose of keeping house and caring for younger children. 
Other workers leave, tempted by offers of higher wages and greater 
opportunities for advancement. Sometimes they are disillusioned 
and become dissatisfied with their new environment. The new 
work and working conditions are not what they hoped for; they 
long for old workmates and the old machine, and desire to reconnect 
with the old concern. If they do return, old employees usually 
prove better workmen and are more contented and loyal. Records 
of employees who leave the service of the company are kept for 
future reference, and those who have left in good standing are 
eligible for reemployment. The records of many companies show 
reemployment of as high as 25 per cent of their former employees. 
In pursuing a policy of reemployment, however, care must be 
exercised not to create the impression that the worker may leave 
the company and return at will; such action might add appreciably 
to the cost of labor turnover or weaken morale and efficiency. 

Voluntary Applicants. To every employment office there comes 
unsolicited an intermittent stream of men and women seeking 
employment. Not everyone who comes is a desirable prospective 
employee. Many are habitual " peddlers of labor/ 7 but others are 
excellent workmen temporarily unemployed. The names of 
desirable applicants for whom there is no immediate opening should 



152 THE TECHNIQUE OF SELECTION AND PLACEMENT 

be filed, and those whom it is necessary to send away without 
filling out a card should be dismissed with courtesy, but not with 
false hope. This is a policy widely adopted by progressive Ameri- 
can firms. Many persons already employed, but who wish to better 
themselves, apply through the mail. These applications should 
receive careful and courteous attention. When vacancies occur 
for which applicants in the prospect file apparently are qualified, 
they are given an opportunity before other outside sources are 
touched. 

Many companies do not file applications from any persons whom 
they cannot employ at the time of application; others go to the 
extreme of hiring only from filed applications; that is, their policy is 
confined to " hiring from the shelf," as it is called. In the case of 
unskilled and semiskilled workmen, applications soon become 
"dead" unless there are special reasons why these individuals 
desire to enter the service of the specific company, such as con- 
venient location, personal ties, or attractive employment con- 
ditions. Such persons are seldom available after a few days, except 
under these special circumstances. In the case of skilled and 
higher grades of technical workers, these files remain " alive" for 
a longer time because, although usually not unemployed for an 
extended period, these workers are always eager for better positions 
than the temporary ones they are forced to fill during slack times. 

Hiring from the shelf has many advantages. For the applicant 
it is an economy of time and money. If he is already employed but 
is seeking a better position, he does not have to lay off to inquire 
about the prospect of a vacancy. The employment office has data 
as to his qualifications and if, after consulting his application blank, 
he appears to be capable of filling the position, he can be called by 
telephone. For the company there are many benefits. When an 
adequate file is maintained, it is unnecessary to depend upon ped- 
dlers of labor who chance to be on hand when a vacancy occurs. 
The right man is seldom picked up in this way. Then, too, an 
application file properly maintained enables the company to keep 
in touch with desirable workers who happen to apply when posi- 
tions are not available. It will raise the standard of applicants, 
provided a reasonable number are sent for after filing applications, 
because good workmen will learn that time is not wasted in dropping 
in to inquire after jobs. Labor turnover is reduced because only 
those workers are recruited whose qualifications, experience, and 
records have been verified. Finally, such a file saves money for the 
company, because the expense of maintaining it is small compared 



RECRUITMENT OF PERSONNEL 153 

with that involved in extra scouting and advertising, which are 
necessary when no available applicants are in sight. 

Institutions of Learning. Each year a long line of youths files 
out of grammar schools, high schools, technical schools, colleges, 
and universities to take places in the industrial, business, and com- 
mercial life of the nation. Here is to be found the largest source 
of employees. The most enterprising concerns now establish con- 
tacts with these institutions. Some send special representatives 
of their employment departments to recruit young people from 
these sources. Each year representatives of large national organi- 
zations such as the American Telephone and Telegraph Company, 
General Electric Company, International Business Machines Cor- 
poration, United States Steel Corporation, Goodyear Tire and Rub- 
ber Company, and others visit the leading universities of the country 
in a nation-wide search for the highest type of university material 
obtainable for the future needs of their respective organizations. 

Many firms have adopted the policy of providing a number of 
places each summer for students. The employment departments 
of some establishments arc in touch with the principals of all 
schools in the community and keep them informed of employment 
needs. Quite recently universities and technical or trade schools 
have established full-time placement or occupational bureaus whonc 
directors attempt to maintain constant touch with the labor market 
in the interest of placing well-qualified graduates and needy stu- 
dents in full-time and part-time positions. Many students in 
schools and universities have had considerable experience, arid 
with intensive training can readily be adapted to the needs of a 
given firm. It is a serious reflection on our educational and indus- 
trial systems that hundreds of thousands of these youths are 
vocationally undirected and allowed to drift into uncharted channels 
of economic activity, in the vague hope that by chance they will 
find proper placement. 

Private Employment Agencies. Organization of the labor 
market has been effected in part through the functioning of private 
and public employment agencies. There are two general types of 
the private agency; the free private agency, and the commercial 
employment bureau. Practically every industrial city of the 
nation has some type of philanthropic service agency which charges 
no fee for placement activities. Sometimes these are maintained 
by fraternal societies, churches, educational institutions, or by the 
generous endowment of a public benefactor. Too often, however, 
because of limited financial resources and scope of activities, their 



154 THE TECHNIQUE OF SELECTION AND PLACEMENT 

functioning exerts an all too small influence upon the efficient 
organization of the various phases of the labor market. 

The best known private agency is that of the commercial employ- 
ment bureau, of which there were estimated to be approximately 
5,000 in 1932 throughout the nation. In 1930, 1,036 were registered 
as operating in New York City, 315 in Chicago, and 191 in Phila- 
delphia. 1 At the end of 1936, there were still in operation in 
California about 300 private commercial agencies in addition to a 
number of nonprofit but dues-charging agencies. 2 

These agencies, operating for the purpose of private profit, 
take millions of dollars annually from the pay envelopes of their 
clients. Only a few of the commercial agencies specialize in 
certain types of labor; as, for instance, certain skilled and semi- 
skilled trade workers, teachers, musicians, and nurses. The 
private employment agency which is operated only as a money- 
making institution is a source of labor that has played a dominant 
role in the recruitment of workers in American industry. To 
employers and employees alike, it is usually the most costly of all 
sources of labor supply. 

In the absence of state or federal regulation, some private com- 
mercial agencies have rendered notable and reasonable service, but 
by far the majority have entered into discreditable practices. 
Often men are shipped to distant points only to find that no work 
exists, or that wages and conditions of work are not as they had 
been represented. Agencies have not infrequently collected a 
double fee by charging both employer and the worker. Some- 
times dishonest practice has led to the splitting of fees between 
agency and employer, or the constant hiring and dropping of 
workers in order to collect the placement fees. During the year 
1934, over 2,000 complaints were registered with the license commis- 
sion against commercial employment agencies located in the city 
of New York. 3 Other evils of the system are suggested in the 
words of Governor Lehman : 4 

Although there are many honest and high-minded men and women 
conducting private employment agencies, it is unfortunate that certain 

1 COMMONS, J. R., and J. B. ANDREWS, Principles of Labor Legislation, 
1936 ed., pp. 6-7. 

2 California State Employment Service, Administration of Unemployment 
Compensation, 1936, Chap. XIX. 

3 COMMONS and ANDREWS, op. cit., p. 7. 

4 Governor Lehman, of New York, in his message to legislature, Jan. 1, 1936, 
reprinted in American Labor Legislation Review, March, 1937, p. 34. 



RECRUITMENT OF PERSONNEL 155 

unscrupulous fee-charging employment bureaus continue their many 
forms of exploitation and fraud of thousands of wage-earners who seek 
employment through them despite repeated heart-breaking experiences 
with such agencies. Applicants for work through these agencies have 
been charged exorbitant fees, have had all sorts of deductions made from 
their wages; have been sent to non-existent jobs and marooned in strange 
communities with no money for meals, bed or transportation; have been 
sent to jobs from which they were automatically discharged after working 
long enough to pay the agency fee; and in some instances girls and women 
have been recruited for vice. 

State- wide regulation, far from handicapping reputable employment 
agencies will give such agencies protection against racketeering com- 
petitors. Reputable agencies should welcome effective state-wide 
regulation. 

The cost to the employer is less definite and measurable but not 
less real. Tbere is a conspicuous absence of discrimination and 
interest in recommending employees. There are innumerable 
instances in industrial experience where workers have been shipped 
to plants regardless of qualifications and fitness for the work. The 
loss to one construction company which, in, a period of great labor 
shortage, called on private profit-making agencies was put at 
$1,000 a month. Moreover, when the labor market is in their 
favor, men insist on a wage high enough to cover the agency ; s fee, 
so the employer bears this added cost, or passes it on to the consumer 
through higher prices for the product. Progressive concerns do 
not usually resort to this source of labor supply except in an emer- 
gency, unless, through the service, it is possible to secure unusual 
workers at a reasonable cost. Other sources invariably will prove 
less costly wherever they can be used. 

The weakness and evils of the system of commercial agencies 
are gradually being checked in part through state and federal super- 
vision of activities. In many states, restrictive legislation limiting 
the maximum fees chargeable, preventing extortion, and insuring 
moral protection has already been enacted. 1 All fee-charging 
agencies, except those operating in the provinces of New Bruns- 
wick, Ontario, and Prince Edward Island, are prohibited by law 
from operating in Canada. 2 There can be little doubt that the 
various states of the union are within their constitutional rights in 
licensing and regulating private agencies. In making recom- 
mendations for uniform state legislation, the Committee on Legis- 

1 "Laws Relating to Employment Agencies in the United States," United 
States Department of Labor, Bulletin 581, Jan. 1, 1933. 

2 COMMONS and ANDREWS, op, tit., p. 8. 



156 THE TECHNIQUE OF SELECTION AND PLACEMEN? 

lation of Private Employment Agencies recently urged that all 
private commercial agencies should be charged an annual fee; that 
employment agents so engaged be bonded to insure full protection 
of workers; that careful investigation be made before granting 
licenses so as to insure suitable premises and an acceptable reputa- 
tion on the part of those in charge; and that fee splitting, false 
advertising, the sending of workers to plants on strike without 
notification thereof, the making of placements in violation of other 
state labor laws, and certain other objectionable practices be 
prohibited. 1 

Public Employment Exchanges. Another force tending to 
check the evils of the commercial employment agency is the increas- 
ing competition offered by public employment exchanges. The 
public employment bureaus of such countries as England, Canada, 
France, and Germany, and, more recently, those being organized 
throughout the United States, have done notable work and are 
becoming well-established institutions. In England, for example, 
public employment exchanges, established under the Labour 
Exchanges Act of 1909, had developed to the point where, on Jan. 
1, 1933, there were no less than 420 permanent full-time employ- 
ment exchanges and 747 branch offices rendering free employment 
service to every part of the British Isles. 2 An indication of the 
scope of the work done by the exchanges in supplying labor where 
needed is found in the fact that out of approximately 1,125,000 
vacancies notified in 1932, the exchanges made 1,086,000 place- 
ments, or 92 per cent of the total. 3 In the larger cities, more than 
one office has been organized in Manchester there are nine such 
offices; in London there are fifty-six. Free public employment 
bureaus were first introduced in Germany in 1840, when a sub- 
sidized office was established in the city of Dresden. In 1930, 
almost 1,000 branch offices successfully placed 154,000 salaried 
employees, which was 72 per cent of all those placed by public and 
noncommercial private agencies during the year. 4 

Following the wartime experience with public employment 
services, the development of public employment exchanges in the 

1 United States Department of Labor, Division of Labor Standards, Reports 
of Committees and Resolutions Adopted by Third National Conference on Labor 
Legislation, Nov. 9-11, 1936, pp. 16-17. 

2 CHEGWIDDEN, T. S., and S. MYRDDIN-EVANS, The Employment Exchange 
Service of Great Britain, p. 81. 

* Ibid., p. 176. 

4 WEIGERT, OSCAR, Placement and Unemployment Insurance in Germany, 
p. 107. 



RECRUITMENT OF PERSONNEL 157 

United States was very slow until the Wagner-Peyser Act became 
a law in June, 1933. When this act was passed there were twenty- 
three independent state employment services operating a total of 192 
offices in 120 different cities throughout the nation. The Wagner- 
Peyser Act provided for a nation-wide system of free public employ- 
ment exchange bureaus maintained through the United States 
Employment Service. The chief function of this new service is to 
assist, by means of federal grants-in-aid, in establishing and main- 
taining systems of employment exchanges in the various states, 
develop and prescribe standards of efficiency, assist local com- 
munities in meeting problems peculiar to their localities, provide 
uniform statistical procedure, and conduct research in employment 
opportunities. The responsibility of carrying out a national 
reemployment program for the benefit of those unemployed during 
the depression was later added to the duties of the service. This 
obligation, however, was temporary in nature, while the major 
functions from the first have been incorporated in a permanent 
national employment service program. 

By June 30, 1936, thirty-five state employment services had 
become affiliated with the United States Employment Service. 1 
These states operated a total of 247 district employment offices 
together with forty-nine branch employment offices. The passing of 
this federal law greatly strengthened the employment activities of old 
organizations where state systems previously operated. In Cali- 
fornia, where state public employment offices had been maintained 
by law since 1915, there were in operation at the time the Wagner- 
Peyser Act was passed thirteen free employment offices together 
with free municipal offices in Long Beach, Santa Monica, Berkeley, 
Palo Alto, and Pasadena. The new federal law made it possible 
for this system to be simplified and expanded considerably under a 
federal grant of some $138,000 annually. 2 The value of such an 

1 The states were Arizona, California, Colorado, Connecticut, Delaware, 
Florida, Idaho, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Minnesota, 
Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New 
York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, 
Rhode Island, South Dakota, Tennessee, Texas, Vermont, Virginia, West 
Virginia, Wisconsin, Wyoming; at the end of the fiscal year, forty-three states 
had accepted the provisions of the Act. (Annual Report of the Secretary of 
Labor, fiscal year ended June 30, 1936, pp. 35-36.) By Dec. 30, 1936, two 
other states, Alabama and South Carolina, had completed application with 
the United States Employment Service. 

2 California State Employment Service, Administration of Unemployment 
Compensation, 1936, Chap. XIX. 



158 THE TECHNIQUE OF SELECTION AND PLACEMENT 

expansion from both the workers' and employers' points of view is 
evidenced in the fact that the new act has allowed the Pasadena 
office to branch out into not only more intensive employment 
services, but vocational counseling and occupational testing work 
as well a development that is bound to bear fruit in* the future. 1 

Recent reports of the United States Employment Service show 
clearly how important an agency in labor recruitment these free 
public exchanges arc becoming. During the first three months of 
1937, almost half a million (495,710) placements with private 
employers, exclusive of all types of government work, were reported 
by the various offices of the service. 2 During the first nine months 
of the fiscal year ending June 30, 1937, a total of 1,416,864 private 
placements was reported. In addition to these, many thousands were 
assigned to public works programs or relief work by the service, 
which, during the emergency unemployment years since the law was 
enacted, has been called upon to carry the burden of government and 
relief placements along with its private placement program. Within 
the fiscal year ending June 30, 1935, the United States Employ- 
ment Service offices registered and classified 4, 115,779 new individual 
applicants making a two-year total registration of 16,750,753. 3 

When properly managed, public employment offices provide an 
effective medium for recruitment not only of unskilled, but of 
skilled and technical employees. In recent years, their efforts have 
been extended to centralization of the labor supply and its most 
economical distribution. Because they have a network of offices 
throughout the state or nation, public employment bureaus have 
their fingers constantly on the pulse of the labor market, can thus 
recruit labor when it is available and as needed without inter- 
fering with industrial activities in other localities, and can issue 
frequent reports advising both employers and employees with 
regard to the status of the labor and employment market. 

Considerable criticism, often justifiable, has been made of public 
employment bureaus on the grounds that they are controlled by 
politicians and manned by political favorites unqualified for this 
important work. As tax-supported institutions they should be 
operated neither for the advantageous placement of organized 

*" Pasadena Combines Placement and Counseling," Employment Service 
News, March, 1937, pp. 5-8. 

2 United States Department of Labor, Monthly Labor Review, May, 1937, 
p. 1271. 

* United States Department of Labor, Handbook of Labor Statistics, 1936 
ed., p. 119. 



RECRUITMENT OF PERSONNEL 150 

workers nor as strike-breaking agencies. The best bureaus are now 
under control of a joint board of representatives of employers, 
employees, and the public, and are staffed by well-qualified persons 
serving under civil service appointment. 

Care is exercised not to misrepresent or conceal any unfavorable 
facts about jobs. In England, railroad fare is advanced to those 
who are placed. Many agencies in the United States, some of 
which, until recently, were supported by funds contributed by city, 
state, and private sources, have gained the confidence of employers 
and unions. Both employers and workers are investigated, espe- 
cially when girls are placed. Many of the offices use the best 
methods of highly developed employment management, including 
standard job specifications, intelligent interviewing, and trade 
tests. By increasing their examining force and following up for 
a considerable period the applicants placed, more successful selec- 
tion and assignment have been achieved. Frequently, those who 
interview and register workers are lacking in the necessary tech- 
nical knowledge of the industries with which they deal. There is 
room for considerable improvement in this particular both in the 
United States and abroad. 

Public employment exchanges so far have not displaced other 
methods of finding work nor other sources of recruitment. They 
have not been used extensively by members of highly organized 
crafts or by the highest grades of unorganized workmen, but 
workers in the unskilled occupations have used them quite generally. 
Employers have not made so wide use of the offices as they deserve, 
largely because of the suspicion that they are not efficiently and 
fairly managed, or because of the types of workers registered 
during the years following 1933. Unfortunately, too often in the 
past workers sent out by the public exchange have lacked physical, 
mental, or occupational fitness; they have arrived after the job 
had been filled; or they have been so broken in morale that they 
could not do a fair day's work. With the application of scientific 
principles of interviewing and placement in public employment 
exchange administration, more reliance is being placed on this type 
of service, and it promises to offer a major source of supply in the 
future. 

Advertising. There is considerable difference of opinion with 
regard to newspaper advertising for employees. When other 
sources prove inadequate to fill their labor needs, even the most 
progressive firms find it necessary to resort to advertising. Many 
concerns use this as the chief source of labor supply, and, although 



160 THE TECHNIQUE OF SELECTION AND PLACEMENT 

they admit it is expensive, they contend it is effective. Some 
employers assert that newspaper advertising has never failed to 
bring forth at least one applicant whose qualifications were such as 
to make possible immediate adaptation to their needs. Other 
employers never use this means of recruiting employees. They 
insist that it is an extremely undesirable source because it costs 
enormous sums of money annually, is a wasteful system of dis- 
tributing labor, results in competition for workers and so raises 
wages, and, by calling attention of a company's employees to 
scarcity of labor in the plant, tends to lower efficiency. One firm 
employing about 20,000 persons had been a big user of the adver- 
tising columns. Newspaper advertising was discontinued, but no 
difference was found in the number of people who came to the 
employment office in search of work. 

Nevertheless, the familiar "Help Wanted" and "Situations 
Wanted " columns of the daily newspapers are among the most 
commonly used methods of recruitment and are probably unsur- 
passed as a source of young and semiskilled help. Until a more 
adequate substitute is found, their popularity will continue. From 
the standpoint of acceptable standards of employment practice, 
their greatest weakness lies in the fact that they are not discriminat- 
ing and entail great expense in weeding out undesirables. Then, 
too, competing employers are tempted to offer illusory attractions in 
employment conditions. This results in a futile interchange of 
employees without conferring lasting benefits upon the firm or the 
applicants for work. Workers are often induced to go on a wild- 
goose chase for jobs only to find that a hundred others have read the 
same advertisement and that comparatively few vacancies existed. 

The blind or unsigned advertisement, which is used by many 
employers, automatically eliminates a number of hopeless and 
undesirable individuals who would not take the trouble to make 
written inquiries. It has the tendency, however, of defeating its 
own ends in that it does not attract the best type of worker the 
one who is already employed. He wants to know that he is not 
applying to his present employer. Workers are suspicious of blinds 
because employers have sometimes used such advertisements to 
test the loyalty of their own employees. 

Companies that enjoy an enviable reputation for fair treatment 
of their employees use only the "open" or signed advertisement, 
inserting their names in all cases and capitalizing the reputation 
which years of humanized management have accumulated. This 
is especially true of construction companies, which find that 



RECRVITMENT OF PERSONNEL 161 

recruitment of an adequate and desirable labor supply is not diffi- 
cult if they have a reputation for providing good barrack or bunk- 
house accommodations and excellent commissary service. Concerns 
with an enlightened personnel policy not only insert their 
names but give general information concerning the average length 
of employees' service with them, the provision of locker rooms, 
shower baths, cafeteria, club rooms, recreational and social oppor- 
tunities, safety and sanitary conditions, hours, wages, bonuses, 
and benefits. Some companies insert an invitation to parents or 
wives to visit the workrooms or factory and inspect " clean, whole- 
some, happy surroundings." The workshop " overlooks the lake," 
has "no dangerous machinery," involves "no carrying of heavy 
bundles," provides "a square deal for everyone," gives "employees 
a voice in running it," and provides "opportunity for creative 
workmanship." In addition to "Help Wanted" columns, the plant 
paper, trade journals, bulletin boards, radio, and other media, are 
used for recruiting purposes. 

Scouting.- In periods of extreme labor scarcity industrial con- 
cerns find it necessary to engage in "scouting," by dispatching 
special recruiting agents or regular members of the employment 
department to competitive or distant localities to search for avail 
able workers. Since the enactment of more stringent immigration 
laws, labor scouts have been very active in the Southern states and 
Mexico, where Negroes and Mexicans have been recruited for the 
iron and steel and other industries of the North. Scouts frequently 
distribute leaflets which give the name of the company, the oppor- 
tunities for employment, the list of trades and jobs open, hours, 
wages, overtime pay, bonuses, and directions for reaching the plant. 
Often scouting is done through a member of the race or nationality 
which is being recruited, the scout in this case being paid so much a 
head for new workers brought to the plant. 

Scouting is effective only as an extreme emergency method, since 
it prohibits the careful selection necessary to build up a stable 
force. Moreover, there is always the danger that labor scouting" 
will degenerate into the practice of labor stealing. Thousands of 
workers are "kidnaped" from other concerns by labor scouts, and 
sometimes, as during the World War, the labor market is completely 
demoralized as a consequence. To take employees away from 
competitors on a purely wage basis is generally viewed by the best 
employment departments as an unwholesome and expensive 
practice. Experience indicates that a man who repeatedly leaves 
one concern to go to another for money considerations will be 



162 THE TECHNIQUE OF SELECTION AND PLACEMENT 

just as discontented in the new place as in the old. When he leaves 
for reasons of general improvement of his status, including the 
opportunity for advancement, and does so in a friendly way and 
after due notice, the results are usually better. Some employment 
departments have been known to refuse work to employees of their 
competitors, so strong an aversion did they hold against labor 
stealing. It is manifestly unfair, however, to apply such a policy 
if the applicant is frank and aboveboard when leaving the service 
of his old employer. A wage earner is just as much entitled to sell 
his services in the most favorable market as the employer is to sell 
his product in such a market. 

As in the case of advertising, labor scouting, despite its defi- 
ciencies, is an established method of recruiting workers. It will 
continue as long as emergencies arise in industry and various states 
lack a more scientific and efficient system of labor distribution, such 
as the United States Employment Service closely coordinated with 
well-developed and proficiently managed state and local employ- 
ment bureaus. The value of such a system for the United States 
was learned during the World War, but the failure of Congress to 
appropriate adequate funds reduced it to a skeleton of its former 
self. Since the passage of the Wagner-Peyser Act of 1933, the 
value of public employment bureaus has been realized again. 

An acceptable system of scouting must be accompanied by ade- 
quate wages, decent hours and conditions of employment, good 
housing and living conditions for men and their families, a reputa- 
tion for fair dealing, and an enlightened personnel program. The 
men who are to do the scouting must be selected with care. They 
must be men who are technically qualified to recruit and select the 
kind of labor needed, whose personalities inspire confidence, and 
who are not unscrupulous salesmen willing always to oversell the 
job in order to get the men. The desirable scout is not found in 
professional recruiting offices outside the company's organization. 
Yet many companies make the mistake of seeking help through 
the professional scout. 

The labor scout must have at his disposal adequate financial 
reserve to assure prompt shipment of men, must be familiar with 
state statutes governing labor recruitment by outside agents, 
should be given credentials to public employment bureaus in the 
states he is to visit, should be given power to engage local physicians 
to examine the men recruited, should take good care of his men in 
transit, and should have each worker sign a card which specifically 
sets forth the terms of employment. These precautions will avoid 



RECRUITMENT OF PERSONNEL 163 

the embarrassment of losing men on account of delayed shipment, 
assure compliance with the laws of the state, and guarantee that 
the men who are recruited are physically capable of doing the work 
required of them. 

Cooperation between Employment Departments. Where there 
has been developed a desirable measure of cooperation among the 
employment departments of different companies, there is voluntary 
mutual exchange of information about prospective employees. If 
an employment supervisor of Company A is unable to place a 
seemingly desirable applicant, he telephones the employment office 
of Company B, C, or D and calls the attention of his friends to the 
applicant. Similarly, when a deserving employee finds it necessary 
to move to another community, the employment manager some- 
times makes it his business to send the name of the person to the 
employment office of the company's plant in that community, if 
it has one there, or to the employment office of some company of 
his acquaintance. 

Sometimes this cooperation takes on an even more important 
form. In many of the nation's industrial cities, the local chambers 
of commerce sponsor weekly or bimonthly meetings of an employ- 
ment managers' or personnel managers' association. At these 
meetings, it has often become a routine, but valuable, procedure to 
call for statements concerning employment opportunities. In this 
simple but direct way, the association serves somewhat as a "clear- 
ing house" for the placement of surplus labor or the recruitment of 
new labor, according to the needs of the individual company. 

Miscellaneous Sources. In addition to the foregoing sources of 
new workers, there are certain others which are used frequently, 
but which are, for the most part, of relatively less importance. 
Every labor union maintains a list of its unemployed, and some 
operate placement offices. In this way, employers are put in touch 
with available craftsmen. In preferential shop agreements, which 
provide that in case of a vacancy a union man is to have prefer- 
ence, employers are required to recruit through union headquarters. 
An illustration of this source of labor supply is found in the "dis- 
patching" or "hiring" halls of the maritime unions where each 
day the men available for work report and are dispatched to the 
stevedoring companies and ship companies as requested. Into 
every town and city, there come migratory craftsmen printers, 
bakers, barbers, carpenters, bricklayers, and others who are 
temporarily unemployed and who register at the headquarters of 
their particular union. 



164 THE TECHNIQUE OF SELECTION AND PLACEMENT 

Charitable organizations, as agencies of the community chest and 
associated charities, make a business of finding employment for the 
more or less unfortunate who come to their attention. Ministers, 
priests, and rabbis are frequently in touch with members of their 
congregations who desire work. Fraternal organizations often 
conduct an office for the placement of their members. Con- 
siderable care must be exercised in recruiting through these philan- 
thropic and fraternal agencies, because sympathy and favoritism 
play a large part in the description of the applicants' qualifications. 
The men who seek jobs through these agencies are often men who 
have failed miserably in economic life. An employment manager 
in an enterprise of some size ventured the statement that 90 per 
cent of the employees he had recruited through charitable sources 
had proved undesirable. On the other hand, excellent material is 
sometimes available through all these sources. Applicants coming 
from them may have excellent moral and economic qualifications 
and may make desirable employees. 

In addition to chambers of commerce and employment managers' 
associations, the offices of manufacturers' and employers' associa- 
tions frequently are in a position to suggest available workers. 
Union workmen look upon these with more or less distrust, so that 
workers for highly organized trades are rarely recruited through 
them. Sometimes the offices of employers' trade associations have 
been used as agencies for recruiting workers to break strikes and 
make effective a blacklisting scheme, so that suspicion is well 
merited. In a recent strike of the Teamsters and Truck Drivers 
Union on the Pacific Coast, a local association of manufacturers in 
one industrial center attempted to open up a nonunion hiring hall 
where the services of truck drivers could be obtained to defeat the 
union strike. In such cases, they seldom furnish able and efficient 
workmen. For the professional detective bureau which makes it a 
business to supply the "right kind" of labor in emergencies, such as 
strikes and lockouts, even less good can be said from the standpoint 
of enlightened employment practice. In large industrial centers, 
various branches of the Y.M.C.A. do some excellent work in placing 
men, many of them high school and college graduates who come to 
the cities in search of larger opportunities. In some instances, the 
stockholders of a company are in a position to suggest desirable 
employees, but on the whole this cannot be viewed as a fruitful 
source. 

The Conference Method of Controlling Recruitment. As a 
means of testing the activities of the employment department in 



RECRUITMENT OF PERSONNEL 165 

matters pertaining to recruitment, a number of large concerns 
have adopted the conference plan. This consists of a weekly 
meeting of department heads and other supervisors who meet with 
the superintendent or employment manager. There is an exchange 
of ideas with regard to the kinds of workers who are proving satis- 
factory and frank criticism of the recruiting work when undesirable 
types are brought into the service of the company. Production, 
attendance, and other records of new employees are brought to the 
meeting as a factual basis for criticism and complaint. Ways and 
means of improving the work of recruitment are devised, and 
suggestions about desirable sources are offered. Such a conference 
is most urgent in large retail establishments or plants where the 
flow of labor is great, and in emergency periods when recruitment 
tends to become less thorough. Even in smaller companies and in 
normal times, weekly conferences on production and employment 
relations are valuable. If the principal sources of labor supply 
tapped by the employment office are yielding mediocre candidates 
for good positions, then steps must be taken to develop more ade- 
quate sources. In the last analysis, the executives can best judge 
the adequacy of the workers who come to them. 



CHAPTER X 
SELECTING THE WORKER 

Careful Selection Indispensable to Efficiency. The early experi- 
ments of Frederick W. Taylor clearly demonstrated what scientific 
selection and placement mean, both to the worker and to his 
employer. Out of the hundreds of men that were employed in the 
Bethlehem Steel Company yards at the time the experiment was 
performed, only one in ten was found to be physically and mentally 
fit to lift heavy pigs of iron from the scrap heap and load them 
onto a freight car all day long. From among those found fit, a 
128-pound Dutchman was the best worker of them all, simply 
because his mental and physical capabilities were of such nature 
that, when he had been properly introduced into his new working 
environment, coached and instructed, he was able to perform his 
simple tasks with a high degree of efficiency. 

Through these and other early demonstrations, the industrial 
world has learned the valuable lesson of scientific selection and 
placement of men. \ Selection includes interviewing and choosing 
the worker whose physical and mental possessions make him best 
qualified to fit into the organization. Placement is the task of 
fitting the worker into a job. The general functions of selection 
and placement comprise the intelligent choice of new workpeople 
from among those whom recruiting agencies have brought to the 
plant, the correction of misplaced workers through the operation 
of an effective system of transfers, and a careful analysis of the 
training, experience, interests, and records of employees for pur- 
poses of promotion. In many organizations, the functions of the 
so-called " personnel department" are confined to those activities 
which are incident to the recruitment, choice, and assignment of 
employees. These, however, are only a part of the important 
responsibilities of a well organized department. 

The effectiveness of any personnel program must rest ultimately 
upon the successful selection of the employees and the proper 
direction of their energies into efficient activities. Sources of labor 
may be adequate and methods of recruitment may be effective, 
but these will not suffice to assure loyalty and stability of the 

166 



SELECTING THE WORKER 167 

working force and general efficiency unless those recruited are care- 
fully scrutinized, well chosen, and properly placed. Recruitment 
and selection are mutually dependent. Proper recruitment will 
furnish good material for selection; scientific selection will dis- 
cover the best of that material; and scientific placement will use it 
to the greatest advantage. 

Value of Proper Selection, An experienced employer of labor 
once remarked, "If I could find any way of choosing and hiring 
employees who are one-half as good, relatively, as the machines I 
buy, my success would be enormous. The most effective machinery, 
excepting that exclusively controlled by patent, is available alike 
to all manufacturers. The main factor of difference between the 
successful and the unsuccessful plant is the human element by 
which machinery is operated. " Proper selection not only enhances 
the potential efficiency of the organization but directly eliminates 
much of the economic waste involved in antiquated methods of 
choosing employees. Estimates indicate that it costs anywhere 
from $25 to $200 to hire and train a new worker for his job, and, 
in operations where valuable material can be easily spoiled by inex- 
perienced workpeople, the expense is even greater. Obviously, the 
cost varies with the degree of skill required and the complexity and 
delicacy of the operation or task. 

An executive of one of the world's largest machine manufac- 
turing companies once estimated that it cost his company over 
$2,000 every time a certain kind of new employee was added to the 
company's payroll. If, before the end of a 2-year intensive training 
program, either the management or employee discovers that a 
mistake has been made in selection, a goodly amount of the com- 
pany's money has been dissipated. The vice-president of a life 
insurance company recently stated that he was spending a year 
in traveling over the entire United States in an effort to select only 
ten or twelve young men who, after several years of intensive life 
insurance training at guaranteed salaries ranging upward from $125 
per month, might make good with the company. A young univer- 
sity-trained man working in the personnel office of a large aircraft 
company by chance ran across eight different "close-out slips" 
terminating the record of eight employees. He noticed these slips 
all came from the same department and all were signed by the 
foreman with the same reason for discharge, to wit, "failure to 
show progress." These men were hired just 2 weeks previously, 
but the company was probably losing much more than the 2 weeks' 
pay for these eight men largely because some one failed to make 



168 THE TECHNIQUE OF SELECTION AND PLACEMENT 

proper selection or proper placement of these new workers. If the 
introduction of scientific methods of selection and of placement 
will enable a concern to reduce its labor turnover so as to avoid the 
necessity of employing a thousand new workers during a year, then 
many thousands of dollars will have been added to its> profit account 
or will be available for higher wages. 

The value of an acceptable system of selection and placement is 
not confined to the choosing of desirable employees arid reducing 
labor turnover but extends to the weeding out of misfits and 
overpaid individuals in the organization. For example, by the 
application of a scries of tests, a corporation discovered that certain 
of its $2,500-a-year employees showed no greater ability than many 
of its $l,000-a-year clerks. Tested by various standards, its higher 
paid individuals were in many cases less capable than lower paid 
ones. Poor selection, misplacement, and the absence of a sys- 
tematic follow-up had cost the company a considerable sum. 

Specifically, the value of proper selection and placement is 
found in at least six factors: the reduction of labor turnover, with 
its consequent wastes; the general increase in the efficiency of 
organization; the saving which results from paying employees 
according to their ability and avoiding payment for incompetence; 
the prompt readjustment of misplaced employees, which enables 
them to yield larger returns on their cost; the economies resulting 
from the reduction of special training courses for excessive numbers 
of new workers; and the intangible advantages that invariably 
accrue from a working force which is contented because it is well 
placed. 

The progress of a company is conditioned by the development 
and advancement of its workers. The vital points at which the 
effectiveness of the working force is originally determined are selec- 
tion and placement. When enlightened labor administration 
within the plant is added to these, efficiency invariably results. 
For this reason, an increasing interest among employers in the 
problem of improving the quality of operatives through scientific 
methods of recruitment, selection, placement, and follow-up has been 
witnessed during recent years. Such methods have value not only 
in the case of ordinary employees but also among major and minor 
executives. 

The Basis of Successful Selection and Placement. Men and 
women cannot be selected and placed successfully unless those 
who do the interviewing of applicants know the nature and require- 
ments of the positions to be filled. Job analysis and jobspecifica- 



SELECTING THE WORKER 169 

tion must precede proper selection and placement. The more 
complete the details available concerning specific jobs, the more 
nearly correct will be the selection and assignment of workers. 
In the proper adjustment of personnel to its duties and responsi- 
bilities, the specific requirements of the job are as important as the 
qualifications of the man. Job analysis and job specification, 
which were discussed in another chapter, indicate the necessary 
requirements of the work ; the application blank, interviews, service 
records, and other personnel instruments furnish necessary data 
relative to the qualifications of the worker. 

Generally speaking, job specification sets forth a careful descrip- 
tion of the work, the job that leads to it, and the job to which it 
leads, responsibilities, permanence, pay, hours, overtime, the kind 
of worker required, the nature of the operations, tools, postures, 
speed, disagreeable features, objections to it, the common sources 
of supply. The application blank, which is considered in detail 
later in this chapter, furnishes information concerning such quali- 
fications as age, education, race, religion, citizenship, residence, 
knowledge, and ability in relation to the job under consideration, 
general intelligence, special abilities, prospect of stability, tempera- 
ment, sociability, appearance, personality, character, physical fit- 
ness, home surroundings and influences, ambition, and wage or 
salary desired. 

Methods of General Selection. In view of present-day practice, 
the selection and placement of workers must be considered as two 
independent functions of the personnel department. There are 
several important reasons for this. Most important is the fact that 
much of American industrial organization (that part which neces- 
sitates the maintenance of a personnel department) is so large and 
complicated that much of the labor supply is secured en masse; 
workers are chosen because of their general qualifications and 
fitness, and only after they are on the payroll are they placed in 
'their individual positions. That this fact is of considerable impor- 
tance is indicated by the necessity for careful follow up, adjustment, 
and transfer of those who at first are not directed into occupations 
which they can fill efficiently. 

General selection is the first and primary step in building up 
the labor force. This function is not complete, however, until each 
worker has been placed in a position which he is capable of filling. 
Because of changes in physical and mental abilities, interest, and 
environmental influences, the tasks of selection and placement are 
permanent ones. 



170 THE TECHNIQUE OF SELECTION AND PLACEMENT 

The dual functions of selection and placement do not preclude 
the possibility of selecting and placing an applicant for a specific 
position all in one operation. When this is the case the applicant 
is chosen because his general qualifications are such as to make him 
valuable to the organization; he is specifically assigned to a par- 
ticular task because of the particular or definite fitness of the 



APPLICATION FOR EMPLOYMENT 

WM. VltENX-8 SONS COMPANY, BOSTON. SUSS. 



D Minted Q Widmd O Dtnrad O Sepit O U D llv wltkt P.rmli D Blll. O Boud Q Ita D 




D* yM wbki Prt Urn imt O FnU Urn* Q Tt*onry O rmiunt D ZT. praeat uiloytr 



Btil* Um nm kMMct Ef HA, In wkkk 



APPLICATION 

V MrM fw .mplerwmt wll)i Vim. Fllwrt 
ttwi Uwrtof. I tortby lutlmritt Wm. Filtiw'i So 
fMa *a rtf hu and Wno/ltt under uJd 



^H2sS3?ES^&^ 

DO NOT WRITE BELOW THIS LINE 



CM*I cm 



, OOT BOTH SIDES 



Fia. 5. Specimen form of application blank (obverse). 

applicant for the position in question. Such combinations are 
desirable whenever possible, but many times they are impossible 
because of the inflexibility of industrial organization or the lack 
of liquidity of the supply of labor. Under these circumstances the 
successful applicant is hired and told that a place will be made for 
him until the desired position opens up, or until his proper place 
in the company can be determined. 

It is important to remember the difference of functions because 
they involve separate and distinct methods of technique. This 
chapter and the one following discuss the methods of general 
selection, that is, selection by application, interview, general intelli- 
gence tests, and physical examination. In Chap. XII, we shall deal 
with the principles of proper placement, which involve various meas- 
urements and analyses designed to find the particular tasks or duties 
which the newly selected employee is best equipped to perform. 



SELECTING THE WORKER 



171 



1. Selection "by Application. In order to simplify the procedure 
in the selection of new employees, most employers have devised a 
questionnaire usually referred to as the "Application Blank." 
Items appearing on these blanks call for information needed to 
determine whether the person applying for work possesses proper 
background, experience, training, character, and physical fitness to 



D DFLOW OF THE LIST FIVE POSITIONS YOU HAVE HELD. 



D .u. iLT. 



BET"'!. 



FIQ. 6. Specimen form of application blank (reverse). 

qualify for employment in general, or for a specific position. 
While these forms vary according to the type of business and occu- 
pation, most of them include the following items i 1 

Name of company. Years attended. Graduate? 

Date of application. Foreign languages (written or 

Applicant's name, address, and phone spoken). 

number. Business experience. 

Name and address of previous 



Date and place of birth. 

Nationality, citizenship, and residence 

period. 

Marital status and dependents. 
Physical traits (height, weight, etc.). 
Position desired. 
Educational training. 
Name of school attended. 

1 For a helpful memorandum on employment applications, see one prepared 
by the Metropolitan Life Insurance Company in 1934. 



and address 
employers. 
Nature of work. 
Dates employed. 
Personal references. 
Outside or particular interests. 
Signature of employee. 



172 THE TECHNIQUE OF SELECTION AND PLACEMENT 

When the application blank covers employment which calls for 
aptitude or other tests in the completion of selection, the form 
will provide such space as may be necessary to record results. The 
Filene Department Store form, reproduced above, carries these 
and several additional items. In some cases, rating and impres- 
sion spaces are provided upon the form, to be filled in by the 
interviewer (see Fig. 6). Some forms are designed so that appli- 
cants are rated according to a standard scale in order to assure 
proper appraisal, while some companies keep personal comments 
or ratings on entirely separate forms. 

Of primary importance in the matter of the application blank is 
the question of whether the applicant shall fill out his own applica- 
tion blank or whether this shall be done by the interviewer. There 
are good reasons for having the applicant do it. This practice 
furnishes the employment office with a type of testing device show- 
ing the applicant's ability to follow instructions carefully and 
completely. If a record is kept of the time taken to fill out the 
application blank the result serves as a rough measure of the speed 
of perception. When a considerable number are waiting to be 
interviewed, the monotony of waiting is broken by utilization of 
time that would otherwise rest heavily upon the applicant's hands. 
In any event, the applicants should be permitted to study carefully 
the various questions in order that answers may be as complete and 
intelligent as possible, and friendly counsel should be offered them 
where interpretation of specific questions is in doubt. 

The actual methods of using this form vary considerably. In 
some cases the applications are accepted by an office clerk without 
interview, to be placed on file until a need for workers arises. 
Again, some employers have the applicants fill in the blank prior 
to the interview. In other cases, the interviewer fills in the form 
at the time of interview. Still other companies prefer to hold a 
preliminary personal interview first; if the applicant is thought 
to have possible qualifications he is asked to fill in the blank. 
Where there is no immediate vacancy, the company either files 
the form for future reference, or, as is the case with most of the 
larger companies, the information is transferred onto coded Findex 
application or personnel record cards, which arc perforated to 
make it possible to determine almost immediately the applicants 
or employees possessing the necessary combination of qualifications. 
Figure 7 shows a form of this card used by a large metropolitan 
bank. Some companies maintaining small numbers of applications 
file by alphabetical order of applicants; others file by type of 



SELECTING THE WORKER 



173 



position best suited. The Findex card makes possible the imme- 
diate cross classification of several thousand of the application 
cards simultaneously and thus is well suited to organizations main- 
taining large files. Where the application cards are filed for future 
reference it is important that the period of maintaining old records 
be limited, since persons filing applications may soon find other 



I 




o 



I 



o o..o o o o 

-S - : jjl s i3 s 5s5 s 5s s 

' 



o o o o 




o o 'oj^o = o o 

SECURITY- FIRST NATIONAL 'BANK OF LOSANOIUS 



O 

> 



ii us 

o o 

S El* 

p if o 



,o 
i* 

O O 

Ok *it 





, 
M- II 

J 

"TTr\<l3C 
~ 



o 



p n 
r 

U 



FIG. 7. Personnel record card. 



employment. General employment and labor conditions existing 
in the communities where application has been made will influence 
the length of this period. 

Considerable time and expense would be involved in having 
every applicant who comes to the office fill out a complete personnel 
record or application blank. Yet, if a waiting list is to have real 
value, it is necessary to have general information about those 
jtDplicants who appear desirable. To meet this need some employ- 



174 THE TECHNIQUE OF SELECTION AND PLACEMENT 



Name 



Age 



Occupation 



Date 



DESCRIPTION 



Color 



Size 



Appearance Health 



Clothes 



Expression 



Physical characteristics 



Remarks 



(Obverse) 



BUSINESS PERSONALITY 



Unusual 



Impressive Favorable 

EDUCATION 



Unimpressive 



Extensive Highly satisfactory Satisfactory Passable 

EXPERIENCE. 
Expert Extensive Meets requirements Incomplete Beginner 

ADAPTABILITY 
Highly adaptable Adaptable Fairly adaptable Doubtful 

FUTURE VALUE 



Very high 



High 



Medium 



Low 



(Reverse) 
FIQ. 8. Preliminary description and rating sheet. 



SELECTING THE WORKER 175 

ment executives have devised the preliminary data and rating 
slip which makes possible a tentative rating of applicants. Such 
items as name, age, present occupation, and general personal and 
physical characteristics are noted ; there is also a preliminary check 
on such qualities as business personality, education, experience, 
adaptability, and future value to the firm. The sample shown in 
Fig. 8 indicates more completely the nature of this instrument. 
If the waiting list is to have practical value, it should be kept 
"alive," that is, the names of applicants who are called in but who 
do not respond should be removed from the files. 

2. The Oral Interview. No phase of personnel procedure can be 
reduced to a basis of mechanical and mathematical precision. 
Instruments and records must always be supplemented by personal 
conferences and human contacts. In the absence of intimate con- 
ference, personnel administration ceases to be personal and becomes 
impersonal and mechanistic. In obtaining necessary information 
regarding applicants for positions, the interview is an indispensable 
agency. Only in an extreme labor shortage or upon the unqualified 
recommendation of a personal friend whose judgment has proved 
reliable, should an employee be hired without some kind of an 
interview. 

Interviewing is a difficult art involving the fine elements of 
diplomacy. It is no job for the immature and inexperienced. In 
the successful interview, every effort is made to have the applicant 
discuss freely his specific qualifications, reveal his general char- 
acteristics, and state his major hopes and ambitions, likes and dis- 
likes. The skillful interview conduces to complete self-analysis, 
albeit an unconscious analysis. When properly conducted, the 
interview indirectly makes the applicant see his own limitations 
and incapacities in relation to the position under consideration, 
without being made to suffer the embarrassment which results from 
the discourteous interview. Frankness, honesty, and truthfulness 
are always encouraged by the carefully planned and skillfully 
conducted interview. 

Honesty, frankness, and truthfulness are equally a responsibility 
of the interviewer. Every essential detail of the position must be 
presented, including the degree of education, skill, training, and 
experience required; the conditions of employment, whether dan- 
gerous or relatively safe, dirty or clean, wet or dry; the hours of 
employment and possible overtime periods, Sunday labor, and 
nightwork; the wage rate, payroll taxes to be deducted, possible 
advances, methods, and time of payment; and promotional oppor- 



176 THE TECHNIQUE OF SELECTION AND PLACEMENT 

tunities. It cannot be too strongly emphasized that cumulative 
discontent, general ill will, and subtle forms of inefficiency develop 
from the vicious habit, so prevalent in American industry, of over- 
selling the position. To avoid this danger, some firms supplement 
the interview of desirable applicants with an actual examination 
of the position and all evidence relating to it. 

Successful interviewing, then, is founded upon adherence to 
certain well-defined principles of conduct. The applicant must 
first be put at ease as completely as possible. An individual seek- 
ing a job is often nervous and timid, and embarrassed by the 
strange surroundings of the employment office. He is usually very 
self-conscious when trying to sell his services and to make a good 
impression. Under these circumstances he welcomes some word or 
attitude from the interviewer that will relieve the tension. 

The interview is inseparably linked up with the personality and 
ability of the interviewer. Pleasant and attractive men and 
women assigned to the important position of interviewing succeed 
by displaying approachableness, turning fear into confidence, and 
making normal reactions possible. To an attractive personality 
must be added a good memory that will retain details and avoid the 
necessity of writing down data in the presence of the applicant; 
tactfulness and a sense of humor; faith in the enterprise; and ability 
to present the case for the job and the company in a persuasive 
manner with due regard for the truth. JA sincere interest in 
humanity is a primary requisite of the expert interviewer. \ This 
interest enables him to understand the applicant's point of view 
and to keep in mind that the decision and choice will affect for 
good or ill a human career and determine in part the success of the 
company. 

The successful interview is so planned and conducted as to get 
the greatest amount of necessary information without resorting to 
rapid-fire methods. This means that the questions shuuld not be 
stilted and stereotyped, but skillfully framed to obtain the required 
data indirectly; and that the method of asking them should not 
be dull and commonplace. 

a. PRELIMINARY INTERVIEW. Many firms now have a prelimi- 
nary and a final interview. In some establishments, the pre- 
liminary interviewer examines the items on the application blank 
and questions the applicant briefly. Inasmuch as the filling out of 
the blank takes time and involves expense, many companies provide 
for the preliminary interview before the application blank is given 
to the prospective employee. If the preliminary interview results 



SELECTING THE WORKER 177 

favorably, the applicant is requested to fill out the blank, is given 
the mental and trade tests adopted by the employment office or the 
educational department, and is scheduled for a physical examina- 
tion. The nature and method of the preliminary interview vary 
with the company. 

The initial reception of an applicant is important. At this time 
first impressions of the prospective employer are formed, and first 
impressions are lasting. At this time also the company's first 
impressions of the applicant are formed. It is in the preliminary 
interview that the weeding-out process is rigidly begun, and when 
effectively carried out results in the saving of time otherwise spent 
in useless questioning. Caution is exercised by progressive con- 
cerns lest the weeding out be conducted too hastily and good 
workers be lost to the company. Snap judgments are to be 
avoided. The tone and attitude of the preliminary interviewer are 
invariably construed as characteristic of the whole organization. 
Just as customers judge the policy of a store by the manner of its 
salespeople, so applicants judge a firm's labor policies by the 
behavior of the interviewer. Obviously, a skillful person should 
be assigned to this important function, but there are many instances 
where the weakest member of the employment staff is given this 
responsibility. Desirable applicants will not bo favorably impressed 
if a clerk indifferently hands out an application blank with the 
instruction to fill it out and hand it back. In the general procedure, 
it must always be remembered that almost every applicant calls 
for a slightly different method of approach, and that the principal 
function of any interview is not merely to pick a man but to select 
the right man for the right place. 

In the interviewing process, jobs are sold and services are 
bought; it is essentially a sale and purchase procedure. The 
memory of a pleasant and courteous reception remains with the 
applicant even though it becomes necessary to reject him, and if he 
enters the service of the company it is with a better spirit than when 
the reverse type of reception is accorded him. The physical features 
and equipment of the employment office, like the attitude of the 
interviewers, reflect the general atmosphere of the company and aid 
in determining the applicant's impression. It should, therefore, be 
clean, comfortable, and congenial. To the credit of a very large 
number of American concerns, it must be said that this is precisely 
the situation in numerous employment offices. 

In the large employment offices, waiting is inevitable, and it is 
necessary to relieve the monotony and strain incident to it. Effort 



178 THE TECHNIQUE OF SELECTION AND PLACEMENT 

should be made to provide adequate seating capacity to eliminate 
the necessity of standing. Many companies provide a good 
assortment of reading matter, including newspapers, magazines, 
and literature concerning the company and its policies. An employ- 
ment office well situated and neatly appointed makes* waiting less 
tiresome, but the physical equipment must not be overdone and 
entirely out of harmony with the rest of the plant's physical outlay. 
A definite attempt should be made to determine the exact need of 
the company and thus avoid the irritating practice of making an 
applicant wait for several hours, only to be told in the end, "We 
have nothing for you." Skillful and prompt weeding out will 
obviate this difficulty. 

b. FINAL INTERVIEW. All final interviews should be held 
privately. An applicant dislikes to answer questions about him- 
self and his personal affairs in the presence of strangers. The 
private office should not be a hidden chamber but have a trans- 
parent glass partition so that those who are waiting their turn may 
have an idea of what is taking place inside. When they can see the 
interviewer and applicant in friendly conference, the ordeal does not 
"look so bad." Many companies have adopted this type of inter- 
view room. 

It is desirable that male and female applicants be segregated as 
soon as possible after entering the employment office, since women 
are often sensitive to association with strangers. Recognition of 
this fact has led many companies to provide separate entrances 
and separate offices for men and women applicants. It has also 
been found a wise policy to have men interview men, and women 
interview women. Experience indicates that women are inclined 
to converse more freely with a woman, a fact that insures a more 
accurate revelation of their qualifications than an interview by a 
man. Likewise, men are reluctant to give necessary information 
when interviewed by a woman. 

3. Selection by Reference. A time-honored method of selecting 
employees is the general or special letter of reference. Although 
letters of recommendation are still widely used in choosing men and 
women in the professions, there is a growing distrust of them in 
industry and commerce. In the professions, professional standing 
still insures honesty and sound judgment (in so far as human judg- 
ment can be sound), but even here cross checks should be developed. 
In business, however, conditions are different. There is a conspicu- 
ous absence of responsibility for the laudatory statements contained 
in the general letter of recommendation. This fact is well demon- 



SELECTING THE WORKER 179 

strated by the experience of one large public utility company which 
received only twenty letters containing adverse references or com- 
ment in response to several thousand letters of inquiry sent out. 1 
The inaccuracy and unreliability of such sources of information are 
attributable to certain conditions. First, the applicant naturally 
lists as references the names of those persons who will be likely to 
give him favorable endorsement, often a close relative or per- 
sonal friend. Then too, human sympathy and prejudice color 
subjective appraisals of people, as is seen by individual rating of the 
same applicant given in the following section. The person who 
writes the letter of recommendation is usually unwilling to prevent 
the employment of the individual he is seldom wholly honest in 
his estimate. Fair and accurate judgment is also precluded in 
some cases because of personal prejudice, jealousy, and antagonism. 
Finally, those who give recommendations usually have little at 
stake in the success of the worker, and often know the applicant 
only in a general way and are in no sense sufficiently conversant 
with his occupational or professional ability to warrant a complete 
and reliable judgment of his qualifications for a particular position. 
Letters are often written as a matter of courtesy for a friend or an 
acquaintance. 

Of far greater value as a source of information about a prospec- 
tive employee is the judgment of a former employer. This is 
especially true if the company has a well-organized personnel depart- 
ment which has the service record of the individual as a basis of 
rating. When obtained in response to a specific inquiry, this type 
of reference has considerable value. A form letter facilitates an 
answer because the special items listed merely need to be checked. 
No letter of reference, however, can be relied upon as the sole basis 
for selection or placement. 

That this instrument should be used as a supplement to the filing 
of application and interview is shown in the experience of a manu- 
facturing company employing several thousand skilled and semi- 
skilled machinists. In its effort to build the payroll by adding 
new employees, the personnel department made placements after 
holding personal interviews and accepting applications. According 
to these standards of selection, those accepted were quite satisfac- 
tory workers, entitled to a certain starting rate of pay. In the 
course of two weeks after hiring, however, returns from letters of 
inquiry sent out to those listed on the form by a number of appli- 

1 WADSWOBTH, GUY, JR., "How to Pick the Men You Want," Personnel 
Journal, vol. 15, March, 1936, p. 335. 



180 THE TECHNIQUE OF SELECTION AND PLACEMENT 

cants at the time of application showed the references to be false 
and the new employees were discharged, but at considerable loss to 
the company. Even this loss, however, was not so great as might 
have been the case if reference letters had been omitted altogether. 

As a precaution against suits for libel, employers in* increasing 
numbers are adopting the " release slip," which is a written state- 
ment specifically exempting the employer from legal prosecution 
for any information contained in the letter of recommendation. 
Each employee who leaves the service of the company and who 
directly or indirectly requests a letter of recommendation is required 
to sign this release before the letter is forwarded to the prospective 
employer. Adverse decisions in damage suits have been responsi- 
ble for this precautionary action. 

4. Selection by Group Rating and Character Analysis. In certain 
types of work, particularly such lines as engineering, selling, inves- 
tigation, and the like, applicants are often selected either partially 
or wholly upon a basis of ratings made during personal conferences 
before placement officers. When one interviewer is responsible, the 
selection is usually based upon an acceptable rating form, similar 
to Fig. 8. Character, personality, and ability analyses of this sort 
are openly subject to all the weaknesses of human prejudice and 
judgment, and thus lie well within the field of moral traits and 
behavior. These analyses seek to pass judgment on such qualities 
as will power, integrity, loyalty, and individual standards. How- 
ever, ratings do present an opportunity to investigate weak 
characteristics and offer a basis of comparing standards of judgment 
of those doing the rating. If given repeatedly by the same person, 
they provide a periodic evaluation of the worker. 

The obvious weaknesses of selection through single rating are 
somewhat overcome by the group-rating system of selection. 
Under this method, ratings by individual interviewers are given for 
the applicant either where the interview has brought him before all 
of the interviewers sitting together as a board, or where interviews 
are held separately and the individual ratings are secretly tallied. 

There are advantages and Weaknesses to both these types of 
group interview. One of the best illustrations of rating by means 
of the interview board will be found in the selection and placement 
procedure used by many civil service commissions. In California, 
for instance, every applicant for a state civil service position sub- 
mits first to a written examination. These tests are designed to 
cover a rather wide range of subject matter that will give a fair 
index to the applicant's innate intelligence, knowledge, and experi- 



SELECTING THE WORKER 181 

ence. If the test is successfully passed, he is given an appoint- 
ment to appear before the State Oral Interview Board, a body of 
from three to five men whose judgment and integrity are relied 
upon by the commission. Each applicant appears before the 
board for 15 to 30 minutes or more, during which time questions are 
asked and the traits of the applicant are carefully observed and 
responses analyzed. In this way, the successful applicant, before 
gaining final civil service appointment, appears personally before 
several interviewers. Advantages of this personal contact are 
obvious. The applicant's character, personality, appearance, 
mannerisms, reaction, mental alertness, and speech can be care- 
fully reviewed. When the interview is completed, each member of 
the board makes his rating of the applicant. If desirable, a further 
reference on the applicant can be sought. These ratings are tallied, 
and the final placement under civil service depends upon a com- 
bination of the final oral ratings and the written civil service 
examination grade. 

The chief weakness of this scheme is the tendency for one 
member of the board to be influenced in his rating by the apparent 
reaction of other members of the board. The individual ratings 
are not always secret. Then, too, in making ratings the values 
assigned seldom express the rater's true views. Given qualities and 
actions are assigned rigid weights and various combinations of 
numerical scores may give the same total rating. 1 

But there can be no doubt that the combined judgment of three 
or five persons is ordinarily sounder than that of one individual. 
Prejudice, partiality, and politics thus tend to be removed from 
selection. Herein lies the chief virtue in this method of selection 
and in the merit system. 

The second variety of group interview involves the pooling of 
individual ratings made by different interviewers at different times. 
In principle, this method should be sound, for it also attempts to 
gain combined human judgment upon the theory that the impres- 
sion made by a certain applicant upon several different individuals 
is a better basis for a selection rating than one developed from 
impressions made upon a single interviewer. 

But curious results have been gained from this kind of procedure. 
Two simple recordings will be sufficient to illustrate the limitations 
of group ratings. One relates to the scores given by twelve different 
interviewers from leading companies who volunteered to interview 

1 See WADSWORTH, GUY, JR., "Practical Employee Ratings," Personnel 
Journal, vol. 14, February, 1935, p. 213, 



182 THE TECHNIQUE OF SELECTION AND PLACEMENT 

and rate each of fifty-seven applicants for a sales position with 
a nationally advertised firm. 

Table 1 presents the ranks assigned the first ten of the fifty- 
seven applicants by each of the twelve chosen interviewers. 1 In 

TABLE 1. RANKS ASSIGNED TEN OF FIFTY-SEVEN APPLICANTS BY TWELVE 

INTERVIEWERS 





Interviewers Assigning Ranks 




1 


2 


3 


4 


5 


6 


7 


8 


9 


10 


11 


12 


Applicant 


Ranking 




(Highest possible score = 1; lowest possible score = 57) 


A 


33 


46 


6 


56 


26 


32 


12 


38 


23 


22 


22 


9 


B 


36 


50 


43 


17 


51 


47 


38 


20 


38 


55 


39 


9 


C 


53 


10 


6 


21 


16 


9 


20 


2 


57 


28 


1 


26 


D 


44 


25 


13 


48 


7 


8 


43 


11 


17 


12 


20 


9 


E 


54 


41 


33 


19 


28 


48 


8 


10 


56 


8 


19 


26 


F 


18 


13 


13 


8 


11 


15 


15 


31 


32 


18 


25 


9 


G 


33 


2 


13 


16 


28 


46 


19 


32 


55 


4 


16 


9 


H 


13 


40 


6 


24 


51 


49 


10 


52 


54 


29 


21 


53 


I 


2 


36 


6 


23 


11 


7 


23 


17 


6 


5 


6 


9 


J 


43 


11 


13 


11 


37 


40 


36 


46 


25 


15 


29 


1 



analyzing these results, it is important to remember that these 
interviewers were not average, rank-and-filo, inexperienced men. 
On the contrary, they were exceptional and experienced sales 
managers, personnel officers, and qualified interviewers of large 
concerns. They were rating the applicants for suitable qualifica- 
tions in the line of work in which they themselves excelled. In 
view of these facts, nothing short of the fallibility of human judg- 
ment can account for the differences in ratings given applicant C 
by two interviewers. One (No. 9) assigned the applicant the lowest 
rating among the fifty-seven applying; the other (No. 11) assigned 
the same applicant first place among the entire group. 

Fortunately, not all group ratings for selection purposes are as 
futile as these data seem to indicate. Many personnel departments 
send out to the various departments what is called a "Thirty-day 
Review" card, asking for ratings on employees hired only a month 
previously, for follow-up and promotional purposes. Figure 9 pre- 
sents the rating card used by a large retail sales organization, and 



1 HOLLINGWOBTH, HARRY L., Vocational Psychology and Character Analysis, 
p. 116. 



SELECTING THE WORKER 



183 



Thirty-day Review 



M_ 



Name 



For your department on_ 



S 

Store No. 



Dept._ 



Occupation 
_at a weekly wage of $_ 



193- 

. was employed 



You are requested to report on employe as indicated on reverse of this card, 
returning it to the employment office without delay. 

RATING 
(Check in proper columns) 

Good Average Poor 

Personality 



Willingness to 

obey orders promptly 

Appearance 
Quality of work 
Quantity of work 



Do you consider employe to be promotional probability? Yes 

No 

Signature 



FIQ. 9. 

Fig. 10 presents a periodic rating form used by a large industrial 
company to rate all hourly employees. The results of such a 
rating given to a group of forty-eight carpenters and painters by 

TABLE 2. FINAL LETTER RATINGS OF GROUP OF CARPENTERS AND PAINTERS 
BY TWO FOREMEN 1 



Agreements and disagreements 


Number 
of cases 


Percentage 
of cases 


Perfect agreement 


25 


52 


Disagreement of one-letter step 


21 


44 


Disagreement of two-letter step 


2 


4 


Disagreement of three-letter step . . . 


o 


o 


Disagreement of four-letter step 














Total 


48 


100 









., p. 107. 



184 THE TECHNIQUE OF SELECTION AND PLACEMENT 



two foremen of a company are set forth in Table 2. Inspection of 
these results shows that perfect agreement was reached in half 
the cases, and fair agreement was reached in all but two of the 



EMPLOYEE'S RATING CHART ^\ 
AC SPARK PLUG DIVISION 

OCNCRAL MOTOR* CORPORATION 


r>AT- EMPLOYE 
HATING rOR PERIOD FRO* 




'~ 




? 


DETAIL* 




OP QUALITY 


UNSATISFACTORY 


AVERAOE 


SATISFACTORY 
POSITIVE QUAUmEC 


DETAIL 


QUALITY 
TOTAL 


REMARKS 


ll 

is 


ACCURACY or 
PRODUCTION 


POU.CD'WOM" 


CA..C. 


AVAO 


Cr 0t 


_f^ 








4 | 


2) 


l 


71 


CARE or 

WORKING SPACE 


LOVINLV 


CAMCIC** 


AV.I.AOI 


""V'.AH*** 


VCHVCklAN 








2 




1 


3 | 


I 


2| 


MATERIAL 




ROUGH 


CARCLMS 


AVIBAGI 












2 




,| 


al 


ll 


' 


il 


PRODUCTION 


4 




Li'' " 


^f""" 


t| 


4| 













Aircrut. 


LOAf WITH 


AV..AO. 




V..Y . U . 











7] 


1 | 


3| 


i! 


21 






*ATCFUt- 


C.RCLC.. 


AVCHAOC 




V "ioVAT 








W 


"3 


if 


>l 


I 


3 


1 






DOLL 


UCARNt.UOWLV 
















ul 


ll 


21 1 


71 


ul 


ftSSSSKSf.uTY' 


i 




l| 


, P 


il 


71 








INITIATIVE 


LIVC* IN A RUT 


'utr'o'll" 


AVKRAOt 


" "wt'<"l" 


VtRV ORIOIMAI. 








I 




ll 


ll 


ll 


1 


ADIl-TTY TO OIRCCT 
THE WORK Or OTHERS 


7 


T.OOKIH. 




AViMjtac 














il 


TT 


ll 


ll 






vrroo* 


POO. 


AV.KAO. 


0000 


MdUCNT 








ATTENDANCE 


4 




2J 


1 


2) 


4| 


i 


ATTITUDE TOWARD* 
COMPANY 


AN 


TAaoNiVrtc 


NT."*ON"iT,C 




c ?"""" 










2 




ll 


3| 


ll 


al 




0PtOAHO 


"".r.o",r." 


N(U TRAL 


"":,"'" 










SUPERIORS 


]] 


il 


1)1 


ll 


l 




I*M'TM? 


"oNTH^r" 


NCUTHAU 


WH(NTOU> 










PILLOW WORKMEN 


1 




j] 


Hi 


1 1 


1 


IS 




" 


"llfjAl""" 


FOLLOW. .OLt. 




uooArioN. 










SAFETY PROGRAM 


3 




/ll ' ' 


sl 


.ll 


1 


Or^ArET^SSLE. 


m ". L * . 






MAJOR RULI* 










3l 


111 


si 


Ul 


3\ 


ACCIDENT RECORD 




.'.Mi 1 ":;" 








^^^ 








111 


ll 


21 1 


ll 


1 


MO*AL CHARACTER 




!!?*( 






0000 


OUTTA N QI M 








2 




ll 


3 t 


ll 


2) 




v 


cur POOR 




.v*.o 














1 




ll 


III 


ll 


lit 


OENERAL 


! 


vovtr 

HO OIKTT 








""p^SSSia"' 1 ' 








APPEARANCE 


7] 


1 


.I 


1 


l 






^ 1 NUMERICAL 
I CRADINO 




J 


CHMKCB AM* AIWROVCQ r-ll 


UPRIHTtOAT, H 4ERIA<.*ROIN< 



Fia. 10. 

cases. Several generalizations have been drawn from a study of 
agreements and disagreements between foremen: 1 

1 SCOTT, WALTER D., R. C. CLOTHIER, and S. B. MATHEWSON, Personnel 
Management, p. 199. 



SELECTING THE WORKER 185 

1. In general, the close agreement between foremen concerning their 
workers justifies the use of the ratings as an index of the general value of 
employees. 

2. Ratings Secured from two supervisors can be used safely for per- 
manent records if they agree within one-letter step on the final letter scale. 
Whenever a disagreement of two or more letter-steps occurs, a conference 
should be held with the disagreeing judges and reratings secured. 

This analysis shows that there are at least some qualities basic 
to a well-qualified applicant for work which are not subject to rigid 
test and measurement, but which nevertheless should be evaluated 
in passing upon the worker. Chief among these qualities are such 
attributes as initiative, cooperation, loyalty, appearance, tactful- 
ness, executive ability, resourcefulness, ambition, and creative 
ability. Human personalities have to evaluate these qualities; men 
have always rated each other with regard to these characteristics. 
If the limitations of such ratings are properly recognized, they may 
be valuable techniques in the scientific selection of work people. 



CHAPTER XI 

TESTS AS AN AID IN GENERAL SELECTION 

The Function of Tests in Selection and Placement. While the 
best final test of ability always is actual production, psychologists 
are agreed that there are certain human qualities which can be 
tested and quantitatively measured in advance of service. Chief 
among this group are mental ability, physical fitness, strength, 
dexterity, skill, and technical knowledge. 

The application of tests in the selection and the placement of 
employees represents an attempt to escape from the uncertainty 
and fallibility of human judgment. Through the medium of intelli- 
gence and other tests an effort is made to determine the real ability 
of applicants in quantitative terms, and to eliminate as far as 
possible the more or less uncertain factor of subjective judgment 
often ruled by either conscious or unconscious personal prejudice. 
Intelligence tests attempt to measure the general mental capacities 
of the individual, to determine whether or not the applicant has 
the capacity to learn certain tasks regardless of actual experience 
or training. Physical tests attempt to determine whether the 
applicant has the necessary physical strength. Aptitude tests, 
special trade tests, and ability tests, on the other hand, attempt 
to determine whether the individual's innate and acquired qualities 
equip him to do specified tasks efficiently. 

Every industry has its quota of men and women who are 
incapable of filling satisfactorily the positions to which they have 
been assigned. High labor turnover, inferior workmanship, and a 
poor product are the inevitable concomitants of this situation. 
Maximum production is dependent not only on mechanical and 
material factors, but also upon men and women who are physically, 
mentally, and technically adapted to their work. But physical 
defects, mental inferiority, and trade ineompetency are not always 
discernible from appearances. Thus, in response to this need, 
certain tests have been or are still being developed to aid in scientific 
selection and placement work. We are concerned first with the 
methods of selection through the application of general intelligence 
tests. 

186 



TESTS AS AN AID IN GENERAL SELECTION 187 

Requirements of an Acceptable Intelligence Test. Intelligence 
tests proved of considerable value in the United States Army during 
the World War. 1 The results obtained under the supervision of 
trained psychologists led to the general conclusion that the rating 
which a man earned furnished a fairly reliable index to his ability 
to learn, to think quickly and accurately, to analyze a situation, 
to maintain a state of mental alertness, and to understand and 
follow instructions, all of which are fundamental elements in general 
intelligence. 

With this background of experience it was natural that there 
should be a demand for the application of mental tests to industry. 
Is there any relationship between a factory worker's intelligence and 
his success and stability? Can intelligence tests be used to advan- 
tage in selection and placement of factory operatives? These 
queries had common currency. It was believed that such testa 
would aid materially in preventing the employment of the mentally 
unfit, selecting workers of superior intelligence for positions requiring 
a high degree of mental ability, introducing a more rational system 
of laying off men, selecting workers for new processes, recruiting 
men for advanced study courses leading to executive positions, and 
assuring scientific administration of transfers and promotions. 
Many were confident that most of the great waste incident to 
faulty placements could be eliminated, if objective measurement of 
individual differences between applicants could be enlisted as a 
supplement to the subjective judgment of interviewers. 

The hope of such results led to considerable experimentation 
with mental tests in business and industry. The failure to discover 
any close correlation between intelligence test scores and the 
common criteria of achievement wage rates, wage advances, pro- 
motions, and turnover is often attributable to the disregard of 
certain fundamental principles and requirements. Among the 
first essentials of a good mental test are standardization of con- 
ditions, time limit, and method of scoring. Uniform instructions 
should be provided so that all persons applying the test will admin- 
ister it in the same way, and care should be taken to preclude 
variation in the conditions under which the test is given and the 
method of determining results. A second requirement is that such 
a test shall be a test of mental alertness and intelligence rather 
than of acquired knowledge or education. Considerable difficulty 
has arisen because inexpert persons used the test to determine a 

1 For a discussion of the Army tests, see reference list for this chapter. 



188 THE TECHNIQUE OF SELECTION AND PLACEMENT 

knowledge of facts rather than to discover intelligence. If the test 
is to be administered to large groups, it should be self-explanatory 
so as to preclude the necessity of long and repeated explanations. 

A good intelligence test will constitute a fairly accurate index 
of the mental alertness of the applicant. The results win 1 reveal 
his judgment, memory, and type of response to given situations ; his 
ability to learn and follow instructions and maintain attention; his 
ability to observe and describe the elements of a situation. Finally, 
tests should be so constructed that they can be scored by a 
mechanical system of stencils and that scoring can be completed 
easily, speedily, and accurately. 

Selection by Intelligence Tests. Intelligence or mental alert- 
ness tests are designed to determine general mental ability, not to 
measure acquired skill or proficiency in any given position or occupa- 
tion. By general intelligence is meant "mental capacity, learning 
ability, ability to adjust to new situations." 1 This capacity is 
innate and fixed. For purposes of selection and placement, the 
relevant questions are: To what extent are different degrees of 
intelligence (as measured by tests) required for the work of different 
occupations? To what extent are degrees of success within an 
occupation correlated with degrees of tested intelligence? And, 
finally, what is the mental capacity of the applicant is it high 
enough to qualify the worker in general and in particular as a valu- 
able employee? Generally speaking, men at different occupational 
levels tend to have distinctly different inherent ability or native 
intelligence. Superior classes of work are likely to be performed by 
people possessing the highest degrees of inborn ability; low grades 
of work are perf ormed by those who, because of the factor of hered- 
ity, possess low degrees of innate capacity. This new phase of the 
field of industrial psychology has made such notable progress in 
recent years that it seems wise to examine briefly the leading types 
of mental tests. 

The most widely used form of intelligence tests consists of a 
printed collection of various questions and problems given to groups 
of people in a manner similar to school examinations. One type of 
Army test (Beta) is nonlanguage hi character, while another type 
(Alpha) requires some facility in reading English. The Army 
Alpha tests were first prepared by the Psychology Committee of 
the National Research Council, and were given to men during the 

1 KORNHAUSER, ARTHUR W., "Intelligence Test-Ratings of Occupational 
Groups," American Economic Review, Supplement, vol. 15, no. 1, March, 1925, 
p. 118. 



TESTS AS AN AID IN GENERAL SELECTION 



189 



World War, chiefly for Army classification purposes. Since that 
time the Army tests have been refined and have been used in the 
quantitative measurement of the native intelligence of thousands of 
adult persons in schools, colleges, business, industry, and commerce 
throughout this country. 

Broadly speaking, these tests follow a fairly standard pattern. 
The Army Group Examination Alpha, Form 9, 1 for instance, is 
made up of eight different tests. The first question in Test 1 pre- 
sents five circles, each ^ inch in diameter, and allows 5 seconds for 
a cross to be made in the first circle and a figure 1 in the last circle 
after the instructions have been orally given by the tester. Other 
illustrative questions and problems are: 



Test 2: 

20 questions. 

utes. 



Time limit, 5 min- 



TestS: 

16 questions testing common sense. 
Time limit, 1 K minutes. 
Instructions: Make cross in square 
before the best answer. 



If you buy 2 packages of tobacco at 
7 each and a pipe for 75^, how much 
change should you get from a $2.00 
bill? Answer ($LU) 

If a drunken man is quarrelsome and 
insists on fighting you, it is usually 
better to 

D knock him down 

3 call the police 

D leave him alone 



Test 4: 

40 sets of words meaning nearly the 

same or opposite thing. Time limit, 

1J minutes. 

Instructions: Draw line under 

"same" or "opposite" according to 

which the pairs of words are. 

Test 5: 

24 mixed true-false sentences. 

Time limit, 2 minutes. 

Instructions: Mark whether true or 

false after sentence is thought to 

make sense. 

Test 6: 

20 sets of numbers. Time limit, 3 

minutes. 

1 Army Group Examination Alpha, 
Washington, D. C. 



(19) haggard-gaunt same-opposite 
(35) carnivorous-herbivorous same- 
opposite 



(10) Thunders rains when it always 
it true-false 

(20) To aid deep great snow a 
military manoeuvres is 

trus- false 

25 25 21 21 17 17 13 13 
United States War Department, 



190 THE TECHNIQUE OF SELECTION AND PLACEMENT 

Instructions: Look at each row of 3 4 6 9 13 18 24 31 

numbers, and on the two dotted lines 

write in the two numbers that should 

come next. 

Test 7: 

40 sets of related words. Time (16) hunter-gun :: fisherman-flsh- 

limit, 3 minutes. net-cold-wet 

Instructions: In each line the first (36) mountain- valley :: genius idiot 

two words are related. Determine write-think-brain 

this relationship, and then underline 

the word following the third word 

which is related in the same way. 

Test 8: 

40 incomplete sentences. Time ( 4 ) The most prominent industry 

limit, 4 minutes. of Chicago is packing brewing 

Instructions: After carefully read- automobiles flour. 

ing the sentence underline the extra (31) Little Nell appears in Vanity 

word making the sentence complete Fair Romola The Old Curiosity 

and correct. Shop Henry IV. 

Other well-known intelligence tests include the Terman and Binet 
tests, the Otis Self -Administering Test of Mental Ability, 1 and the 
Series I Mental Alertness, tests 2 especially designed for commercial 
and business needs. The Otis test is composed of seventy-five 
questions and problems of same-opposite, true-false, completion, 
proverbial, related words and sentences types, and simple problems 
of mathematics and logic. The test, however, is unlike the Army 
tests in that it is given as a unit without time subdivisions fpr various 
types of questions and problems, the time limit usually being either 
20 or 30 minutes for the entire examination. All standardized 
/tests of intelligence are tried out experimentally and evaluated 
before they are used as a measuring device, for it must be certain 
that scores agree with the known ability of people who are experi- 
mentally tested. A test should be accepted only after this pro- 
cedure has been followed. 

1 Published by the World Book Company, Yonkcrs-On-Hudson, N. Y., 
and 2126 Prairie Ave., Chicago, 111. 

2 Published exclusively by C. H. Stoelting and Company, Chicago. Thia 
test is composed of six parts particularly designed to measure mental alertness, 
perception, ability to follow instructions, logical reasoning, arid accuracy of 
judgment. The short time limit involved makes it particularly suitable to 
industrial usage. 



TESTS AS AN AID IN GENERAL SELECTION 191 

One unusual type of mental test given to all applicants for work 
with the Carnegie Steel Corporation is in the nature of a single 
problem: 1 

A railroad train had a crew of three, and three passengers, traveling 
between Chicago and New York. The train crew is made up of an engineer, 
fireman, and a guard. Their names are Smith, Jones, and Robinson, but 
not necessarily in that order. The passengers are Smith, Jones, and Robin- 
son, but will be referred to as Mr. Smith, Mr. Jones, and Mr. Robinson. 

Mr. Robinson lives in New York. Mr. Jones' annual salary is $5,000. 
The guard lives halfway between New York and Chicago and his namesake 
among the passengers lives in Chicago. The guard's closest neighbor is 
one of the passengers and his annual salary is exactly three times that of the 
guard. 

Smith beat the fireman at billiards. 

The problem is: What is the name of the engineer? 

Results of Mental Tests in Industry. Interest in general intelli- 
gence tests was greatly increased during and immediately following 
the World War. The use of tests for general hiring purposes is now 
becoming a well-established personnel function in many types of 
organization, such as civil service, certain professions, commercial 
and manufacturing companies. In manufacturing, for instance, 
perhaps as many as a third of the total number of larger companies 
are today using some type of mental test in general hiring. 2 There 
are ever-increasing experimental data which show marked correla- 
tions between mental alertness, on the one hand, and value rat- 
ings, occupational aptitudes, and production performance, on the 
other. The lowest scores of intelligence are often found among 
common laborers in trades requiring the least skill and training, with 
a graduation of mental alertness according to the requirements of 
the occupation. Following is a graphic form of mental alertness 
standards for various occupational groups (Test Series I) of a large 
manufacturing company. 8 In the department of one company 
where women office workers were employed, each employee was 
given a mental alertness test and, at the same time, was ranked in 
" general value to the company " by her respective supervisor with 
the results as presented in Table 3. 4 

1 Reader's Digest, vol. 21, no. 125, September, 1932, p. 55. Time range is 5 
minutes to 2 hours. 

2 See results of a recent survey presented in Factory Management and 
Maintenance, vol. 94, no. 12, December, 1936, p. 39. 

8 SCOTT, W. D., R. C. CLOTHIER, and S. B. MATHBWSON, Personnel Manage- 
ment, p. 256. 

4 Ibid., p. 253. 



192 THE TECHNIQUE OF SELECTION AND PLACEMENT 



Obviously many comparisons similar to this one would fail to 
show the relatively close correlation between mental alertness and 
supervisor ranking here disclosed because there are duties in many 
divisions of industry where mental alertness is no test of efficient 
performance, and there are many supervisors whose personal* ratings 
are no true index to the worker's worth and productive capacity. 
OCCUPATIONAL STANDARDS ON MENTAL- ALERTNESS TEST 

For male applicants and male employees in a large tire manufacturing company 



M. A, 
scale 
points 


Factory 
school 
instructors 


Chemical 
engineers 
and 
chemists 


Engineers 
other than 
chemical 


Draftsmen 


Clerks 


Dispatch 
clerks 


Inspectors 
and shift 
foremen 


Messengers 
and mail 
boys 




M. A. 
scale 
points 


100- 




















-100 


90- 




















-90 


80- 




















-80 


70- 




















-70 


- 


Average 


Average 
















- 


60- 


score -62 


score = 61 


Average 














-60 








score = 57 
















0- 


Critical 
score- 50 


Critical 




Average 
score 49 


Average 










-50 


- 




score = 4 5 


Critical 




score =46 


Average 
score -43 


Average 
score -= 43 






- 


40- 






score -40 


Critical 












-40 


- 








score. 35 


Critical 


Critical 








- 


30- 










score -30 


score - 30 


Critical 


Average 
score -25 




-30 
















score =23 








20- 
















Critical 




-20 


- 
















score - 15 




- 


10- 




















-10 


0- 




















-0 


Mental Note: H an a pp| IC ant scores below the "critical score" for his occupation, he should M ental 
Alertness possess compensating qualifications to be favorably considered for employment. Alertness 


Score Score 



FlQ. 11. 

It has been estimated that the Otis test used in the scientific selec* 
tion of life underwriters measures only 7 per cent of the successful 
attributes of salesmen in life underwriting. 1 

It is surprising, however, to learn of the large number of 
employers who keep mediocre and mentally deficient workers on 
the payroll and assign them to duties which they are not mentally 
equipped to perform. When such is the case, studies have shown 
that the poorer workers come and go in time, thus adding consider- 
ably to the turnover costs and diminishing the average per unit out- 

1 STEWARD, VERNE, The Technique of Testing in Agency Building, p. 7. 



TESTS AS AN AID IN GENERAL SELECTION 



193 



TABLE 3. COMPARISON OF MENTAL TEST AND AVERAGE SUPERVISOR RANKINGS 
OP OFFICE EMPLOYEES 



Employee 


Test score 


Ranking by force 


Average ranking 
by supervisors 


A 


49.0 


1.0 


1 


B 


48.0 


2.0 


6 


C 


. 45.0 


3.0 


3 


D 


44.5 


4.0 


4 


E 


42.5 


5.0 


5 


F 


40.0 


6.0 


2 


G 


38.5 


7.5 


7 


H 


38.5 


7.5 


8 


I 


36.5 


9.0 


11 


J 


32.5 


10.0 


14 


K 


32.0 


11.0 


13 


L 


30.0 


12.0 


9 


M 


28.0 


13.0 


12 


N 


24.0 


14.0 


10 



put of work. A study comparing the range of mental alertness of 
women employees doing similar work in four different companies 
has shown the range of intelligence to be more than 2^ times greater 
in one than in another. 1 Again, in the case of messenger boys 
employed by a third company, approximately 35 per cent of those 
with a mental alertness score of 40 resigned over a period of time, while 
only 2 per cent of those with a score of 55 to 60 left the company 
during the same period. 2 In a fourth case which involved women 
clerks who were given a mental test at the time of employment, 
a rating, somewhat similar in principle to that suggested in 
Fig. 9 above, was called for from the supervisors at the end of 3 
months. This rating was to indicate the general value of each 
employee to the company. Upon checking these data with the 
original scores of the test, it was discovered that almost invariably 
those who rated high in the general value also rated high in the 
original mental score and, conversely, those who were rated low by 
the supervisors made mental scores far bel6w the average for the 
entire group. 

The Los Angeles Gas and Electric Corporation reports the results 
of a comparison of two groups of employees, one group of 594 persons 

1 SCOTT, CLOTHIER, and MATHEWSON, op, dt. t p. 261. 

* Ibid., p. 263. 



194 THE TECHNIQUE OF SELECTION AND PLACEMENT 

hired without being given intelligence tests and another group of the 
first 108 persons hired after this testing technique was initiated, as 
presented in the accompaying figure. 1 In concluding the analysis 
of these results, it is stated that: 

1. Intelligence tests can be applied to a service organization in such a way 
as to multiply chances of successful selection. Scores in these tests do not tab 
and earmark applicants who will invariably succeed, but selections made within 
"favorable score ranges" increase the percentage of success. 

2. Intelligence test findings will rule out some applicants who conceivably 
might succeed. The same statement could be made regarding any method 
of selection now in use. Not by any means infallible, test findings merely point 
to greater or less probability of success in given cases. 1 



COMPARISON OF"NON-TEST" 
AND "TEST" EMPLOYEES 



TOTAL HIRINGS-702 

NON-TEST- 594 PERSONS 

TEST- 108 PERSONS 





NON-TEST EMPLOYEES 

THESE WERE HIRED PRIOR TO THE 
ADOPTION OF TESTING METHODS 



TEST EMPLOYEES 

THESE WERE SELECTED ON BASIS 
OF TEST STANDING 



FIG. 12. 



This company reports that these tests have definitely improved 
the technique of selection and that they have furnished measures 
of selection which otherwise could not have been obtained. 

Another company reports that the adoption of the Num Score 
for toolmaking apprentices has led to an improvement of the quality 
of apprentices selected as much as was formerly accomplished in a 

1 WADSWORTH, GUY, JR., "Tests Prove Worth/' PersonnelJournal, vol. 14, 
November, 1935, p. 186. 



TESTS AS AN AID IN GENERAL SELECTION 195 

year of trial in the course. The company has reduced the number of 
hirings necessary to maintain an even flow of satisfactory first-year 
apprentices and has reduced the turnover due to failure and, to 
some extent, length of time required to determine failure. 1 Tests 
for general intelligence, interests, ascendance, and extroversion 
were given to 556 new life insurance agents and 115 assistant man- 
agers. Later, in comparing the results of these tests with sales and 
job performance, it was found that: 

1. Ascendance (ability to meet face to face) and extroversion (outwardly 
projected thoughts, social activities, etc.) to a moderate degree and intelli- 
gence above the lowest 20 per cent are reliable in predicting success in selling. 

2. Education, experience, length of service, age, and nationality show no 
appreciable effect. 

3. In cases involving assistant managers, personal data and intelligence 
are of greatest importance in determining success.* 

But the director of medical research of R. H. Macy & Co., Inc., 
states that "on the whole, it appears that . . . the largest issue in 
successful salesmanship is a personality one, and this is better 
evaluated through the psychiatric method than the psychological." 3 

It has been previously stated that actual productivity is the best 
final test of the desirability and capability of any worker. In this 
connection, the results of a comparison made between mental test 
ratings and production records of several hundred employees of a 
large clothing company are enlightening: 4 

Out of several hundred who took the test, two hundred and ninety cases 
were taken at random and were investigated to find out whether ability 
as shown in the test had any relation to productivity at the machines. 
This productivity was measured with reference to the standard as set by 
time study and computed in per cents. Four weeks was taken aa a 
productive period and an average made of the operative's work per hour for 
the whole period. For example : If the standard set for a particular opera- 
tion had been sixty units an hour and for the past four weeks an operator 
had averaged forty^five pieces per hour, the capacity would have been 

1 POND, M., "What Is New in Employment Testing," Personnel Journal, 
vol. 11, June, 1932, p. 10. 

2 SCHULTZ, RICHARD S., "Test Selected Salesmen Are Successful," Personnel 
Journal, vol. 14, October, 1935, pp. 140, 142. 

3 ANDERSON, V. V., Psychiatry in Industry, p. 231. 

4 American Statistical Association, Journal, March, 1923, pp. 603, 604, 606. 
A test was worked out, modeled more or less upon army tests. ... It was 

composed of six different parts; recognition of geometrical objects, missing 
parts test, cancellation, a code test, cube estimation, and numerical sequence 
test. . . . 



196 THE TECHNIQUE OF SELECTION AND PLACEMENT 

rated seventy-five per cent. Had the average been seventy-five pieces, the 
capacity would have been rated at one hundred twenty-five per cent. The 
cases selected had passed through the learning period and were working at 
what was assumed to be their normal rate. It was ... a fair sample of the 
operator's work. . . . Although the mental test showed a fairly high relation- 
ship with the operator's performance at a machine, it was by no means com- 
plete or constant. There are undoubtedly a large number of factors that 
enter into the making of a skilled operator and insuring from that operator a 
steady flow of production. The above analysis tends to show that a definite 
minimum amount of intelligence or alertness is necessary. Beyond this 
the operator may still drag behind or fail, and one of the important 
causes . . . lies in the amount of incentive the operator brings to the 
work. To give an example, . . . almost without exception if a girl is 
required by her parents to turn over her complete earnings she does not 
work nearly so well as when an agreement is made with her parents that 
she be permitted to have for herself all above a certain stipulated amount. 
The emotional background is equally important; but to try to describe all 
the ramifications of this factor and its attendant social and cultural aspects 
would be far outside this study. ... In summary, therefore, we feel con- 
vinced of the following points regarding the employment methods ... in 
the Cloth craft Shops: 

That the use of mental tests, although only a partial measurement, is 
the quickest, most accurate, and most economical method of prophesying 
future skill at machines and of placing operators at types of work most 
suited to their capacity. 

Reasonably high correlations have been found consistently 
between intelligence test scores and achievement among clerks, office 
boys, stenographers, and various types of industrial workers. With 
workmen in a number of miscellaneous occupations, such as streetcar 
motormen, telephone operators, certain salespeople, detail inspec- 
tors, and waiters and waitresses, only slight and negligible correla- 
tions are usually found. Little or no correlation has appeared in 
certain applications of tests to higher executives and sales managers. 1 

The application of tests to a group of more than 100 boys in a 
Middle Western enterprise revealed a close correlation between test 
scores and later efficiency, wages, and turnover. After an interval 

1 For a further discussion of the concrete application of tests in industry and 
business see, A. W. Kornhauser, "Some Business Applications of a Mental 
Alertness Test," Journal of Personnel Research, vol. 1, 1922, pp. 103-122. For a 
discussion of the value of their application in the selection of insurance salesmen, 
see Verne Steward, Selection of Sales Personnel, 1936, and the Use and Value of 
Special Tests in the Selection of Life Underwriters, 1934. Also see Millicent 
Pond, "Selective Placement of Mental Workers," Journal of Personnel Research, 
vol, 5, no. 9, January, 1927, pp. 343-368, 



TESTS AS AN AID IN GENERAL SELECTION 197 

of 2 years, test scores were compared with performance and service 
records. Of those who were still with the company, the boy who 
made the highest test was receiving the highest salary; the two 
who made the lowest test scores were getting the lowest salaries. 
Ninety-seven per cent of the boys who were promoted came from 
the highest test score group. The average score of the 29 who had 
been promoted to junior clerks was 46.2 per cent; the average score 
of those who were not promoted was 25.1 per cent. 

Another interesting correlation of these data appeared between 
test scores and turnover. The average score of all the boys was 
38.7 per cent. The 63 who were still with the company scored an 
average of 41.6 per cent, whereas the average score of the 48 who 
were no longer with the company was only 35.1 per cent. Those 
who had left for better positions had an average score of 44.7 per 
cent; those who were discharged had an average of only 28.1 per 
cent. The conclusion was reached that a boy is always as good as 
his test and may be better. 

This company's experience taught it that the total test score is 
less important than its analysis and use. For example, the match- 
ing of invoices requires close attention to details and quick detection 
of errors. One boy scored 48 per cent in the general test and 6 per 
cent in detection of details; another boy had a general score of 
42.5 per cent and 9.5 per cent in detection of details. These two 
boys were assigned to the position of matching invoices. The first 
lad, who had the lower score in detection of details, asked for a 
transfer after 6 weeks, while the other became an executive in this 
branch of the organization. 

The presence of a large number of mentally inferior individuals 
in an organization cannot but have deleterious effects. They are 
unsystematic in their methods of work, neglectful and forgetful of 
duties, and frequently manifest a lack of punctuality, regularity, and 
responsibility. They are usually the most ready to give up their 
jobs at the slightest provocation and dissatisfaction, irrespective 
of the consequences, and often do so without having another job 
in sight. Moreover, there is a growing belief, based upon careful 
observation, that a considerable number of factory accidents are 
due to lack of intelligence. 

Next to the mentally inferior workers are those with what are 
ordinarily termed " psychopathic personalities ," that is, individuals 
who, though they are not lacking in intelligence or intellectual 
development, exhibit certain abnormalities of temperament and 
behavior. Often they are excessively egocentric in disposition, 



198 THE TECHNIQUE OF SELECTION AND PLACEMENT 

having an exaggerated opinion of their own ability and importance. 
They frequently leave the service of a company for little or no 
reason. A study of 100 unemployed cases entered as patients at 
the Psychopathic Hospital, Boston, Mass., showed that 65 per cent 
belonged to the psychopathic group, and that in almogt every 
instance the cause of unemployment was this psychopathic tendency. 

Limitations and Weaknesses of Mental Tests. Far too much 
has been expected of intelligence tests in industry, and the over- 
enthusiastic have been disappointed with the actual results. No 
reputable psychologist will claim that such tests constitute an 
infallible instrument for the correlation of mental traits and occupa- 
tional requirements. It is a fact of industrial experience that 
individuals tend to gravitate toward those occupations which are 
generally suited to their capacities and inclinations and that certain 
occupational levels present fairly definite boundaries over which 
some individuals are unable to pass readily and which others find 
impossible to scale. Occupational nonconipeting groups are prob- 
ably fixed more by hereditary differences than by environment, 
habit, or chance. Mental tests can aid materially in bringing about 
better adjustments between workers and their work by directing 
men and women into jobs and occupations for which they are men- 
tally equipped; but the value of such tests in selection is probably 
much less than their value in general vocational guidance. 

Mental tests are not adequate as a sole measurement of probable 
effectiveness in industry and business. Efficiency and success are 
partly dependent upon factors other than intelligence. The Army 
tests did not measure loyalty, bravery, power to command, and 
other natural traits that made men " carry on." These and many 
so-called " character traits" cannot be measured by a test of men- 
tality. Honesty, sociability, kindness, cooperativeness, ambition, 
faithfulness, and loyalty are not always correlated with intelligence. 
It may be true that such desirable traits are more likely to be 
found among intelligent than among unintelligent individuals. But 
differences in opportunity and environment are too real to make 
sure that innate ability and achievement will always be correlated. 
Moreover, emotional and moral character are not yet measurable, 
and these are important in all divisions of life in which intellectual 
capacity is being measured. The human factor must always be 
more or less of a variable in the actual administration of tests. 

A low score is not necessarily an index of inferior intelligence. 
The applicant may be physically indisposed at the time the exami- 
nation is taken, or he may be excessively nervous; or family con- 



TESTS AS AN AID IN GENERAL SELECTION 199 

ditions, such as sickness, may prevent him from doing his best. 
Moreover, he may be unalterably opposed to any kind of test and 
make no attempt to reveal his real mental ability. Either because 
little intelligence is needed or because other factors are more 
important, there is often a surprising lack of correlation between 
intelligence rating and occupational skill. Finally, the public 
school system, through the elimination at various stages of those 
who can for intellectual reasons go no further, functions as a 
selective agent for industrial placement. Where children drop out 
of school for economic and other reasons not associated with inborn 
ability, this selective process does not operate. 

The limitations of these . employment tests have been summa- 
rized by an employment manager of a large department store: 1 

At the present time we are not using tests, although as conditions 
improve and there is not quite as much pressure of detail, as well as fewer 
former and other experienced employees available, we plan to include cer- 
tain test procedures whose principal function will be to eliminate from 
further consideration individuals lacking certain specific abilities recognized 
as being necessary to the successful conduct of a particular job. We believe 
that the successful use of any test results is almost entirely in the trained 
ability of those responsible for the selection in interpreting the test results 
in the general picture of the individual, particularly with regard to work 
and thinking habits, and the determining factor of the use to which abilities 
may be put. 

But there is at least one other serious weakness to mental tests. 
It is clear from an examination of the contents of such tests that 
they do not fully measure innate intelligence as against acquired 
knowledge. Thus, there is a constant tendency in their use to 
place too little emphasis upon the applicant's ability to "swing 
into line" with the company and to acquire valuable knowledge as 
he grows and develops with it. 

Intelligence tests, then, are not in themselves an adequate basis 
for selecting and placing employees. They must be supplemented 
by means of measuring physical vigor, dexterity, emotional quality, 
special abilities, and character. The matter has been appropriately 
summed up thus: 

No one familiar with the field of mental tests doubts the position of 
importance they will occupy in the future. The only danger at present lies 
in the indiscriminate use of the tests by persons not qualified to administer 

1 BAKER, HELEN, Personnel Programs in Department Stores, Industrial 
Relations Section, Princeton University, p. 18. 



200 THE TECHNIQUE OF SELECTION AND PLACEMENT 

them, and in cases where their application is not justified. As measuring 
devices for a serious purpose they can be used only by those who understand 
their nature and recognize their limitations. 1 

Physical Tests and Examination as Selective Aids. A final 
basis of employee selection is that of the general physical exami- 
nation and the various special physical tests that may be used to 
supplement it. Physical examinations are now generally recog- 
nized by industrial concerns as an integral part of personnel pro- 
cedure. In a later chapter, we shall consider the details of a 
physical examination in relation to industrial medicine and hygiene. 
Our purpose here is to suggest its general aims and value in the 
process of choosing and assigning employees. 

The relative importance of physical examinations in American 
factories is demonstrated by the results of a recent study completed 
by the United States Department of Labor, 2 covering 224 establish- 
ments of various types with a payroll of 387,826 employees. Of 
the total number of companies included, 114, or 51 per cent, required 
a physical examination of all prospective employees. In 8 com- 
panies, 3.6 per cent, such examinations were in use for a part of 
the employees, while in the remaining 102 plants, 45 per cent, no 
physical examinations were required. It is significant to note 
further that within the groups of establishments where a centralized 
employment or personnel office was maintained, as in oil and steel 
companies, by far the majority of employees were hired only after 
physical examination (82 per cent, or above). In contrast, how- 
ever, among the establishments where only a few centralized 
employment offices were maintained, noticeably in the shoe plants 
and among the textile plants of the South, more than 80 per cent 
of the employees were hired with no physical examination of any 
kind. 

The physical examination is designed to eliminate the expense 
and waste involved in employing persons physically incapable of 
doing their work efficiently, to protect other employees against 
contagious and communicable diseases, to prevent the new worker 
from being assigned to tasks that will overtax his physical powers 
and result in permanent injury, and to safeguard the consuming 
public from germs transferred to goods by disease carriers who may 
have handled them. 

1 POFFENBERGEK, A. T., "Psychological Examinations," Scientific American 
Monthly, vol. 3, March, 1921, p. 211. 

2 "Hiring and Separation Methods in American Factories," Monthly Labor 
Review, vol. 35, November, 1932, p. 4, 



TESTS AS AN AID IN GENERAL SELECTION 201 

Most companies require as a minimum the passing of a general 
physical examination. In some industries, special senses must be 
strong in order to withstand constant strain upon them. In the 
manufacture of buttons, for example, the matching of colors and 
shades requires excellent eyesight, and employees who have weak 
eyes or who are color-blind are by no means to be assigned to this 
work. Likewise, color blindness in a railroad engineer would have 
disastrous results, so especial care is taken to examine such workers 
frequently in order to avoid the development of physical deficiencies 
that would affect their efficiency or endanger the safety of patrons. 

In recent years, rather simple but effective mechanical devices 
have been made available as auxiliary tools in supplementing the 
general physical examination. For the testing of certain muscles 
in the arms and legs preparatory to placement in special jobs, where 
muscular lifting strength is an important physical quality, an 
instrument known as the "dynamometer" can be used. The foot 
operation of a lever on a heavy stamping or drawing machine might 
readily make possible the use of such an instrument. Where hearing 
is of great importance the "audiometer " is used in scientifically meas- 
uring its capacity. In the process of selecting streetcar motormen, 
the peripheral vision (arc of sight when eyes are at rest) must cover 
a certain field in order to permit such operators to keep their eyes 
"on the track" and still observe the presence of approaching traffic. 
Scientific tests measuring these arcs of observations are made by 
placing the applicant in a position facing the center of a semi- 
circular black disk studded with small electric lights. One by one 
these lights are flashed on, and with the eyes still fastened to the 
center light in the semicircle, the applicant signals when lights 
farther and farther from the center can no longer be seen when 
turned on. 

Most other testing devices for physical capacity are too compli- 
cated to have much practical value outside the psychologcal 
laboratory. 

Because of the time and expense involved, the physical exami- 
nation is not given until the applicant has been selected by the 
personnel department and if necessary approved by the head of the 
department to which he has been assigned. The nature and exact- 
ness of the physical examination vary with the requirements of the 
industry. In some instances it is ridiculously superficial and practi- 
cally without value; in others it is thorough and yields beneficial 
results. When seriously applied, the physical examination 
endeavors to establish the individual's health status as regards 



202 THE TECHNIQUE OF SELECTION AND PLACEMENT 

contagious diseases and epilepsy; the soundness of his special senses, 
particularly sight and hearing; the condition of his throat and 
teeth, heart and lungs; and the presence or absence of hernia, 
varicosities, and flat feet, as well as general physical strength and 
fitness. 

Many wage earners have a suspicious attitude toward physical 
examinations in industry, and labor organizations frequently oppose 
them. Fear of being rejected or of discovering a physical defect of 
which he is not aware is responsible for the individual's opposition. 
Organized labor objects on the ground that a physical examination 
is strictly a personal matter and that frequently it has been used 
as a means of discriminating against and rejecting members of a 
union and those in sympathy with the aims and methods of union- 
ism. It is conceivable that an unscrupulous employer might use 
the physical examination as a means of " breaking the back of 
organized labor," but ordinarily it is administered for nobler 
purposes and opposition to it is usually unjustified and unwar- 
ranted. As a matter of fact, only about 3 per cent of those exam- 
ined are rejected. Considerable educational work is sometimes 
necessary to make the workers see the advantages of physical 
examination, but interest and confidence frequently follow a fair 
presentation of its values. 

Rejecting the Applicant. Very often, for any one or several 
reasons, it is necessary to reject persons who apply for employment. 
No positions may be available; possible positions may be unsuited 
to the physical and mental qualifications of the applicant; he may 
not possess the requisite mental ability, skill, and experience; his 
references may be weak; his personality may be negative; or he may 
have worked for the firm before and his previous record is not such 
as to warrant his reemployment. Sometimes the applicant's general 
appearance and his attitude toward the inquiries put by the inter- 
viewer impress the latter unfavorably. Not infrequently indi- 
viduals come from plants that are known to be having labor trouble 
or in which the grade of workmanship is known to be inferior. 

Whatever the reason for rejecting an individual, an enlightened 
labor policy demands that he be sent away with a cordial and 
grateful feeling toward the company because of the courteous treat- 
ment he has received in the employment or personnel office. It is 
just as easy to turn men away graciously as it is to turn them away 
abruptly. A simple explanation will suffice to leave a good impres- 
sion of the company on the mind of the applicant. This does not 
preclude a frank statement of the reasons for rejection in cases 



TESTS AS AN AID IN GENERAL SELECTION 203 

where a previous bad record, lack of proper qualifications, or some 
other consideration is the deciding factor. It is well always to 
remember that the man who is seeking work is no less human than 
those who are employed, but that for the time being he is less 
fortunate. Often, he is a workman with an excellent record who is 
temporarily unemployed because of economic conditions over which 
he has no control. In some cases he may be already employed and 
just seeking a chance to better himself. He should not be given 
false hope, but he is deserving of kindly treatment regardless of his 
qualities and hopes. 



CHAPTER XII 

SCIENTIFIC PLACEMENT: PRINCIPLES AND PROCEDURE 

Relationship between Selection and Placement. It must not be 
concluded from the discussion in the preceding chapters that the 
function of selecting labor is centralized completely in the personnel 
office, nor that selection is efficiently carried on without specific 
regard for the positions to be filled. In fact, the personnel manager 
seldom assumes full responsibility for determining the standards of 
selection or the labor requirements of any division of the organiza- 
tion except those of his own office. But when a scientific analysis of 
the requirements of each task or position has been accomplished 
through job standardization, as described in Chap. VIII, the person- 
nel office is quite able to fill efficiently the labor needs of the various 
divisions of the organization. This function is best performed by 
means of close cooperation between the personnel department 
(central employment office) and all other departments of the com- 
pany. Thus the problem of selection discussed above in reality 
becomes the dual problem of selection and placement. Selection 
is never fully completed until placement has been made, since 
placement invariably follows selection sooner or later. It is only 
because of the high degree of specialization that has worked itself 
into the field of personnel administration, as in most other fields 
related to industry, that these two functions of selection and place- 
ment at times appear to be separate and distinct. 

It has been suggested that this apparent division exists largely 
because of certain standardized practices, chief of which are job 
specification and standardization, and the procedure of employment 
requisition. When every task in the organization has been analyzed 
and standardized so that positive minimum specifications for the 
completion of the task have been established, it becomes a relatively 
simple matter for the personnel office to select individual workers 
whose mental and physical make-up and experience or aptitudes 
indicate that they are best fitted for the job in question. 

When specific jobs requiring concrete qualifications are availa- 
ble the function of selection is broadened to include simultaneously 
that of actual placement. Under these conditions the personnel 

204 



SCIENTIFIC PLACEMENT 



205 



office is not choosing employees whose mental and physical charac- 
teristics, when improved by intensive training, will qualify them 
for specific tasks. On the contrary, under these circumstances 
the worker is to be picked for the job, not trained for it. Both 
types of functions selection alone, and selection and placement 
combined are being performed constantly by the personnel and 
employment divisions of practically all important organizations, 
and it is difficult to say which is the more important. Unquestion- 
ably, the general practice is to select the applicant for immediate 
placement. 



From, dept 

No. wanted 



EMPLOYMENT REQUISITION 
Date- 



Date to start- 
Kind of work_ 
Why needed 



Q Male D Hire 
Q Female Q Transfer 



Salary $_ 



_Per Week 



Approximate Length 
of Tune Needed 



Qualifications: (Age Education Experience)_ 



If you know anyone suitable for this position 
give name and dept 



Approved 



Signed Dept. Head 



DEPT. HEAD: Fill in separate requisitions for immediate and future needs. 
On requisitions for future needs, show the date on which employees are wanted. 
Fill in a requisition for each class of worker needed. Have requisitions approved 
by either a member of the advisory board or the house manager. Then send 
requisitions by messenger to head of employment dept. 



FIG. 13. 

Requisitions for Help. In large organizations, selection with 
specific placement in view is usually accomplished by means of 
the employment requisition. Requests for man power usually 
come directly from the heads of departments to the personnel office 
where they are carefully scrutinized by the supervisor or manager. 
If the personnel program is only slightly developed, the requisi- 
tion specifications must be quite complete, setting forth such items 
as the number of workers desired; education, training, and experi- 
ence necessary; personal qualities preferred; and conditions and 
duties of employment, including the work or task to be done, wage 
rates, hours, and general character of the work place. 

In establishments where job specifications have been made, 
such a detailed requisition blank is unnecessary. The only items 



206 THE TECHNIQUE OF SELECTION AND PLACEMENT 

required are the name and symbol of the job, number of workers 
wanted, and the date on which they are to report for work. The 
form shown in Fig. 13 is typical of the requisition card used h\ 
industrial plants. In large enterprises the employment office some- 
times adopts the practice of keeping a " Requisition Summary" 
which indicates at a glance the labor needs of each department and 
the number of jobs that have been filled, thus giving a perpetual 
inventory of the employment situation. 

Department heads and foremen often fail to forward their 
requisitions to the employment office far enough in advance to allow 
for careful selection of employees. This neglect is responsible for 
considerable difficulty, especially when skilled and experienced 
workers are needed, because it is not always possible for the employ- 
ment department to recruit the type of workmen qualified for the 
vacancies. All requisitions for labor should be forwarded as far in 
advance as possible; "rush" or "extra-rush" orders should be 
prohibited except in extreme emergencies. 

Special Ability Tests, As already suggested, industrial experi- 
ence has proved that for certain classes of occupations mental 
ability has little economic significance, even though selection in 
general is aided through the application of the mental and physical 
tests already discussed. With the coming of the automatic machine 
and division of labor, however, the demand upon intellectual 
resourcefulness is often relatively insignificant, so that morons may 
be the best machine tenders and intelligence may be a positive 
detriment. On the other hand, certain kinds of work require a 
high degree of special ability. The chief task of scientific manage- 
ment is to direct these differently equipped workers to the posts in 
industry and commerce where they are most contented and produc- 
tive. This is no small task. 

Several different types of tests have been devised to aid in the 
duties of proper placement of workers. One type, the aptitude 
test, is designed to detect inclinations and propensities, either 
natural or acquired, for doing certain types of work. The aptitude 
test measures such natural abilities as perception, speed, accuracy 
of movement, keenness of vision and hearing, sensitivity to changes 
of body position, and sensitivity to color and tones. There are 
numerous forms of these tests, but among the best known are the 
Wiggly Block and the Special Relations tests. Certain salespeople, 
machine workers, streetcar operators, and railroad engineers are 
often placed by such tests. A special type of aptitude test is the 
Finger Dexterity Test or the Pinboard Test, especially designed to 



SCIENTIFIC PLACEMENT 207 

measure the speed and steadiness with which the fingers of the hand 
can be moved up and down. This test involves the use of a large 
flat surface panel, at one side of which are numerous wooden pegs or 
pins. A large part of the panel is perforated with various sized 
holes, and the applicant is carefully timed in placing all the pegs, 
sometimes three at a time, into the appropriate holes on the panel. 
This is of particular value in the choice of typists and telephone 
switchboard operators. 

The great difficulty met in preparing this type of test is the 
determination of the special abilities required in specific occupations. 
What appears to be a simple operation to a layman may, from a 
psychological point of view, subdivide into fifteen or twenty special 
functions. The work of a telephone operator, for example, is 
broken up into many special functions. This is fundamentally a 
matter of job analysis. 

Special mental tests measure the various capacities of the mind. 
The mental faculties of basic importance in certain positions are 
power of attention, memory, imagination, judgment, reasoning, and 
capacity to make accurate and quick observations. Attention 
may be concentrated for a considerable length of time or it may be 
instantaneous. Some people commit to memory quickly and as 
quickly forget; others acquire slowly but have very retentive 
memories. Sense of space, that is, correct judgment of spatial 
dimensions, whether by eye or by the coordination of various 
muscles in the hands or arms or legs or feet, is very important for 
certain occupations and professions. In numerous trades, delicacy 
of perception is essential; sense of touch is indispensable in others. 
An insufficiently sensitive touch means failure to discriminate 
between various grades of woolen, linen, and cotton goods, which 
would be costly in the case of a buyer for a mercantile house. 
Likewise, a fine touch is necessary for all trades in which materials 
have to be handled and instantly rated, as for carpenters, joiners, 
turners, and furniture makers. Speed and accuracy are indis- 
pensable requisites of an efficient stenographer. Special abilities 
tests of various kinds have resulted in classifying workers fairly 
close to their known proficiency, and are accepted as very valuable 
in selection and placement. 

Achievement tests also serve an important role in proper selec- 
tion. These tests measure the accomplishments of the worker 
his past experience, education, observation, and acquired factual 
knowledge. They are of great aid in detecting the skill with which 
a machinist will attend a complicated lathe and in determining 



208 THE TECHNIQUE OF SELECTION AND PLACEMENT 

whether he knows the right thing to do in repairing an emergency 
breakdown. Most trade tests are nothing more than special forms 
of achievement tests, since they deal in the measurement of acquired 
knowledge in the performance of special trades. 

Last to be considered are the emotional tests, those. which deal 
with the emotional reactions of the human being to his environ- 
ment; his mannerisms, sensitivity, personal traits; his personality 
and character. Needless to say, these are among the most difficult 
of all human traits to measure; yet they are among the most 
important in determining whether a placement will be successful. 

Achievement Tests. Of all the special ability tests available 
to the personnel manager, the achievement or trade test is of greatest 
practical value. Many people view with scepticism the idea that 
a workman's degree of skill can be determined by tests requiring 
only a few minutes to administer. They insist that a month of 
careful observation is necessary in order to classify workmen justly 
and accurately. Such persons are surprised when informed that 
successful measurements of skill have not only been developed, but 
can be administered by examiners who are not skilled in the trade 
for which the test has been devised. Better results are possible if 
prolonged observation is made of a workman on the job, but such 
a process is too long and too costly, especially when the company 
is large and considerable numbers of men are added to the force 
daily. A man's word and the record of his trade experience are 
frequently inadequate and unreliable evidence of his trade ability, 
because, as a rule, these must be verified by reference to other, and 
perhaps competitive, institutions, which may be motivated by a 
desire to retain the good will of employees generally. Hence trade 
tests are a necessity for purposes of economy. Efficiency and 
proper selection and placement are inconceivable without 
them. 

Trade skill means that a workman possesses a systematized 
body of knowledge relative to the various elements of his trade and 
has the capacity to execute the various movements and do the 
numerous operations, not only singly but in combination. It 
" implies something more than mere automatism or a fixed set of 
habits, namely, the ability to perceive and correct a faulty adjust- 
ment at any moment." 1 Gilbreth explains skill by suggesting 

1 ACHILLES, PAUL STRONG, "Some Psychological Aspects of Scientific 
Management," Journal of the Society for the Advancement of Management, vol. I, 
no. 3, May, 1936, p. 69, 



SCIENTIFIC PLACEMENT 209 

that it is "dexterity, plus knowledge which can adapt itself to 
changing situations and is capable of improvement." 1 

In determining trade proficiency, oral tests are sometimes used 
because they are economical and easy to administer, being applied 
to large numbers of men in a comparatively short time and without 
equipment. Recently, however, several standardized written tests 
have been made available for testing certain types of applicants, 
-such as file clerks and stenographers. The Thurstorie Examination 
in Typing, 2 for instance, is a written form composed of three 
separate tests. The first calls for speed and accuracy in retyping a 
page from the corrected first copy of a manuscript. Test 2 necessi- 
tates the typing, in proper form and space, of a number of unsorted 
inventory records; and Test 3 is a spelling test of fifty words, some 
of which are misspelled on the test sheet. The complete test takes 
approximately five minutes, and instructions are self-explanatory. 

The Thurstone Examination in Clerical Work, Form A, 3 is 
composed of tests involving speed and accuracy in checking errors or 
misspelled words in text form; the crossing out of specific letters in a 
long line of unsorted letters; the matching of specified letters for 
figures from a leading key; the sorting of names and cities from a 
table; the transposing and rearrangement of numbers; the com- 
putation of problems involving fractions, decimals, and percentages ; 
and, finally, the matching of proverbs with similar meanings. The 
final score depends upon both speed and accuracy. 

An effective supplementary technique in this type of test is to be 
gained through the use of pictures. In a picture test, a toolmaker 
may be shown a group of blue prints calling for operations on 
different machine tools and asked to name, offhand, various 
machines which are required for the performance of each operation ; 
likewise a machinist may be shown a picture of a collection of 
machine parts and asked to name them. When written and picture 
tests seem an insufficient means of discovering the degree of skill, 
an applicant is sometimes given an opportunity to demonstrate his 
ability by performing some representative task. Many companies 
still prefer the performance method and rely upon it exclusively. 
Experience suggests, however, that it is better to use all three 

1 GILBRETH, LILLIAN M., Trained Men, Autumn, 1930. (International Cor- 
respondence School). 

2 Thurstone Employment Tests, Examination in Typing, Form A, World 
Book Company. 

9 Ibid. 



210 THE TECHNIQUE OF SELECTION AND PLACEMENT 

techniques as supplementary agencies in the determination of 
trade ability. 

Perhaps next in practical importance are the aptitude tests. 
Here .also, written standard tests have become available. The 
Stanford Scientific Aptitude Test, 1 which has been designed for the 
purpose of detecting the inclinations or special abilities of college 
people, contains exercises of which the following are samples : 

Exercise 1. Suppose you have plenty of leisure and the necessary 
means for meeting the situation described. Check (x) frankly the state- 
ment which comes nearest to the way in which your first impulse would lead 
you to handle the matter. . . . 

IV. While freezing some ice cream you became interested in obtain- 
ing the lowest possible temperature from a mixture of ice and salt, but 
found contradictory statements in two books as to the proportion of 
salt and ice. 

1. D Take a portion of ice and salt that is an average of those suggested 

by the books. 

2. D Mix ice and salt in suggested portions and check the information 

given in the books. 

3. D Call up an ice cream factory and secure the information needed. 

Exercise A. Rank the following definitions of an automobile according 
to their merit; that is, write 1 in the square next to the best definition, 2 
next to the second best, etc. 

D An automobile is a mechanical vehicle which is gradually sup- 
planting vehicles drawn by horses. 

D An automobile is a self-propelling carriage driven by a gas engine. 

D An automobile is a self-propelling vehicle, ordinarily on four wheels, 
not directed by tracks, and traveling on roadways or streets. 

D An automobile is a self-propelling carriage, ordinarily on four wheels, 
driven by a gas or steam engine, or by an electric motor. 

Exercise E. Write a check (x) in the square next to the correct answer 
to the questions listed below. 

1. What will be the average cost of living in this country in the year 

3000? 

D 1. About $50 per month per capita. 

D 2. About $100 per month per capita. 

D 3. About $200 per month per capita. 

D 4. About $300 per month per capita. 

D 5. Over $300 per month per capita. 

D 6. If unable to answer put a check here. 

1 Stanford Scientific Aotitude Test, Stanford University Press, 1930. 



SCIENTIFIC PLACEMENT 211 

Exercise J. 

II. There is a train leaving City A every hour (on the hour) and going 

to City B, At the same time another train leaves City B going to A. 

The journey lasts exactly 20 hours, You took a train from A. 

How many trains did you meet on your way to B, counting the one 

that reaches A at the moment of your departure and the one that 

leaves B at your arrival? 

D Answer here 

If you don't enjoy this type of problem, put a check here: D 

Exercise K. 

1. A physicist wanted to measure the length of a fine wire with precision; 
for this reason he measured it several times. Below are given the 
results of his measuring. 

1st measuring 13.63 cm. 4th measuring 13.14 cm. 

2d measuring 13.13 cm. 5th measuring 13.15 cm. 

3d measuring 13.12 cm. 6th measuring 13.16 cm. 

What is the probable length of the wire? Answer here: D 

Exercise 0. 

I. The " Evening Star" correspondent writes from City X: "A plan 
was offered by X, located on the shore of Lake Ontario, by which it 
was proposed to generate at low cost electric light and power for the 
vicinity. The method consisted of digging a deep pit in the lowest 
part of the shore, at the bottom of which the plant was to be located. 
The cost of equipment for the plant would be relatively low, as it 
would consist only of generators run by turbines to which the lake 
water would be led through a large pipe." 

At the meeting of the council various reasons were given by the 
members either for or against this project. Put an x in the squares 
next to the statements which you would endorse, and a next to 
those to which you would object. 

D 1. I am in favor of this project, for the plant will be almost as advan- 
tageous as any using a natural waterfall. 

D 2. I oppose this project for the plan will never be practicable. 
D 3. I am in favor of the project, for very cheap power would be 

generated by the proposed method. * 

D 4. I am opposed to the project, for such a plant would be very 
unsanitary. 

The author of the MacQuarrie Test for Mechanical Ability 1 
states that "no estimate of mechanical ability can be anything but 
rough. Nor is an accurate measurement necessary. There is no 
valid evidence at present to show that the carpenter requires more 
mechanical ability than the machinist, or that the house painter 
must develop greater skill than the plumber. A candidate for a 

1 MACQUARRIE, T. W., MacQuarrie Test for Mechanical Ability, 1925. 



212 THE TECHNIQUE OF SELECTION AND PLACEMENT 



mechanical trade should show a high degree of mechanical ability 
before money is spent upon his training. If we are to increase 
efficiency, we must train those best fitted for the work." Here- 
with are a few illustrations of the type of test suggested by 
MacQuarrie as suitable for checking mechanical ability. 

COPYING TEST 






TEST HERE IS TO REPRODUCE THE FIGURES IN BLACK UNES ON CORRESPONDING DOTS 

FIG. 14. 

BLOCK TEST 




HERE THE TEST IS TO DETERMINE QUICKLY THE NUMBER 

OF BLOCKS TOUCHING THOSE MARKED WITH AN X 

FIG. 15. 

PURSUIT TEST 




WERE THE TEST IS TO PLACE ON THE RIGHT HAND SIDE OF THE LINES 
NUMBERS CORRESPONDING TO THOSE AT THE OTHER END OF EACH LINE 

FIG. 16. 

Principles Governing the Formulation of Placement Tests. 
Trade and aptitude tests, like all mental tests, must first be tried 
out before being relied upon to discover the skill of a workman. 
The value of any trade test is not in its theoretical exactness but in 
its proved ability to select and classify correctly men of all degrees 
of skill within the trade. If the test does succeed in classifying men 
in the groups in which they are known by performance record to 



SCIENTIFIC PLACEMENT 213 

belong, then it can be relied upon to classify accurately men about 
whom nothing is known in advance of the examination. Before a 
test is used to select and classify new employees, therefore, it 
should be tried out on old employees whose trade skill is well known. 

A good oral or written trade test conforms to certain funda- 
mental principles. It is formulated in the exact language of the 
trade. The meaning of all questions is clear and each question is 
complete in itself, requiring no explanation. Catch and chance 
questions are avoided, as are questions which can be answered by 
"Yes" or "No." The questions call for brief and concise answers. 
After a process of critical selection, the seemingly most usable 
questions are given a preliminary trial on a number of craftsmen 
from different shops and plants to determine their general applica- 
tion and to avoid specialized methods or modes of expression which 
are current only in a given community. If a trade test is accept- 
able, a known expert when tested is able to answer all, or nearly 
all, of the questions correctly, a journeyman will answer the major- 
ity of them, an apprentice a small proportion, and a novice prac- 
tically none. On the basis of these trial experiences and results, a 
critical system of scores is worked out. 

Performance tests are devised by conference with experts in the 
trade and consist of some simple tasks that can be performed 
quickly and with a small amount of apparatus but which are ade- 
quate to indicate the degree of skill of the performer. These tests 
should require the smallest possible quantity of tools and materials, 
be capable of standardization, consist of work typical of that which 
is regularly performed, require not more than 45 minutes for com- 
pletion by a journeyman, and comprise operations so exact that a 
standard correct form of product is always obtainable. 

Skillful interviewing is frequently a good substitute for the 
administration of formal trade tests. By using a number of stand- 
ardized trade questions, the interviewer can usually make an effec- 
tive check upon the statements of an applicant relative to his trade 
knowledge and experience. When a standardized interview is 
based upon job analysis and personnel description, it is compara- 
tively easy to check those essential points of information that should 
be covered in a good trade test. Industrial experience shows that 
trade language and knowledge of terms and measurements required 
in actual operation are highly correlated with trade ability, and that 
unless a man is actually an experienced workman he does not acquire 
the information on which a good trade test is based. When 
scientifically constructed and carefully given, however, both trade 



214 THE TECHNIQUE OF SELECTION AND PLACEMENT 

and aptitude tests can offer valuable aid in the most efficient place- 
ment of workpeople. 

Analyzing Personality and Vocational Interest in Placement. 
In dealing with human nature this field will remain indefinitely 
the "no-man's land," although scientific progress is slowly being 
made in attempts to predetermine an individual's reaction to 
given situations and environments through analysis of tem- 
perament, personality, and vocational interest. An applicant or 
a present employee may have keen powers of perception, generous 
mental capacities, special qualities that make him peculiarly adapt- 
able to a certain type of work, and an abundance of physical 
strength and energy with which to complete a task. However, 
unless his temperament and personality are such that he can fit 
happily into his environment and cooperate with other minds and 
personalities with which he must inevitably come in contact in 
the course of the fulfillment of his duties, he will be of little value 
to the organization of which he is supposed to be a part, or to himself 
as a producer of goods or services. A progressive policy of personnel 
administration, therefore, makes it imperative for those responsible 
to do all that is humanly possible to fit temperaments, individual 
interests, and personalities into the organization in such a combina- 
tion and balance as will insure greatest harmony, efficiency, and 
contentment. The degree of success with which this is done, if 
other principles of selection and placement have been followed, often 
makes the difference between a successful and an unsuccessful 
organization. 

Personality determines the way in which an individual human 
being is able to get along, to live and work with others. It is a 
composite of many inherited and acquired characteristics. Emo- 
tional stability, neurotic tendencies, self-sufficiency or insufficiency, 
dominance, submission, despondency, egotism or inferiority com- 
plexes, melancholia, timidity, suspicion, self-preservation these 
are the major forces which determine the individual's temperament 
and personality. Many reputable psychologists are now inclined 
to explain temperament as the resultant of all these forces simul- 
taneously influencing the individual. In discussing the theory of 
temperament, it has been stated: 1 

An important part of RoeanofTs theory of personality is the concept of 
abnormal behavior merely as uncontrolled manifestations of the same 

1 HUMM, DONC ASTER G., and GUY W. WADS WORTH, JR., The Humm- 
Wadsworth Temperament Scale, published by D. G. Humm, 651 N. Parkman 
Ave., Los Angeles, 1934. 



SCIENTIFIC PLACEMENT 215 

temperamental components which actuate the normal individual. Stated 
otherwise, such components are present in some degree in the tempera- 
mental organization of every individual. . . . Each group of traits dealt 
with is regarded as a component of temperament. Diagnosis consists of 
identifying the component or components which appear to predominate or 
to be emphasized in the temperamental make-up of a given subject. Anal- 
ysis of temperament requires measurement of each component present, 
whether manifest or latent. 

Five classifications of components are made for the purpose of 
diagnosis and analysis: 1 

Component Disorder in Which Observed 

1. Normal ...................... No disorder: proper balance 

2. Hysteroid (or Antisocial) ....... Hysteria, criminalism 

3. Cycloid: 

a. Manic phase ............. Manic-depressive psychoses 

b. Depressed phase .......... Involutional melancholia 

4. Schizoid: 

a. Antistic phase ............ Dementia praecox 

b. Paranoid phase ........... Paranoic conditions 

5. Epileptoid .................... Mental disorders allied with epilepsy 

In explaining the chief characteristics of each of these compon- 
ents, Humm and Wadsworth state: 2 

1. The "Normal" Component is primarily a control mechanism, provid- 
ing rational balance and temperamental equilibrium. It underlies the con- 
servatism and conformity to socially acceptable conduct observed in the 
well adjusted subject. Essentially a " brake" or " balance wheel/' the 
normal component presents mainly characteristics, associated with 
restraint, and persons in whom it is over-accentuated may be given to 
mdiscriminating conservatism. In diagnosis, the term "normal" is rarely 
used alone except for such ultraconservatives. It is generally used in 
combinations such as "normal-cycloid," "normal-schizoid," etc., where 
it refers to individuals whose temperaments are under control, and who 
are essentially well adjusted, but who also show a large degree of cycloid 
or schizoid temperament. . . . 

2. The Hysteroid Component is concerned essentially with self-preserva- 
tion. An individual with an excess of this component possesses a character 
defect with ethically inferior motivation, manifested by malingering, steal- 
ing, lying, cheating, and similar anti-social behavior. A moderate degree 
of hysteroid tendency underlies much of our prudence, shrewdness and 
diplomacy, and may even contribute to social adjustment, since socially 
acceptable conduct often serves the ends of self-interest. 

3. The Cycloid Component is characterized by emotionality, fluctuations 
in activity, and interference with voluntary attention. The manic phase 



* Ibid., p. 2. 



216 THE TECHNIQUE OF SELECTION AND PLACEMENT 

is manifested by some degree of elation, pressure of activity and distracti- 
bility, together with such manifestations of excitement as jests, pranks, 
enthusiasms, impatience, etc. The depressed phase is manifested by some 
degree of sadness, lessened activity, dearth of ideas, and associated charac- 
teristics such as worry, timidity, equilibrium, hot-headedness, difficulty in 
sleeping, etc. Cycloid subjects are enterprising, sensitive to social situa- 
tions, versatile, and sympathetic. They are handicapped by such tend- 
encies as emotional thinking, lack of persistence, changeability of mood. 

4. The Schizoid Component is characterized by heightened imagination. 
It leads to a tendency toward day-dream life, concerning which the subject 
is sensitive. The antistic manifestations are seclusiveness, shyness, sug- 
gestibility and the like, accompanied by an ability to visualize and to 
concentrate on special tasks, excluding diverting interests. The paranoid 
manifestations include stubborn adherence to fixed ideas, conceit, suspicion 
and contempt for the opinions of others, with behavior fitting these traits. 
In the presence of sufficient "normal" component, the paranoid phase is 
of value in pushing through programs which meet with resistance. 

5. The Epileptoid Component is characterized by inspirations to achieve- 
ment which are meticulously developed and pushed through to completion. 
It causes the subject to spend endless time in working out projects, and 
yet, at times, to appear inconsistent because of some contradictory inspira- 
tion. The inspirational tendency is often of a religious nature. There are 
sometimes explosive temper manifestations, often occurring on slight provo- 
cation, after long periods of endurance. Some physiological symptoms 
associated with epilepsy, as well as epilepsy, are likely to be present or to 
appear in the history. 

Temperament is analyzed by means of answers to questions. 
The Humm-Wadsworth Temperament Scale Test, for instance, is 
made up of 318 questions, of which the following are illustrative. 
They call for either "Yes" or "No" answers; no time limit is 
placed upon completion: 

Do you like to meet people and make new friends? Yes No 

Have you several times .been unjustly punished? Yes No 
Do you sometimes find yourself so restless you can scarcely 

sit still? Yes No 
Do you dislike having to rush in your work? Yes No 
Have you ever caused a quarrel between friends by some- 
thing you let slip? Yes No 
Does it make you nervous to find yourself alone in a large 

space? Yes No 

Do most people you meet interest you? N Yes No 

Are you inclined to be uncomfortably self-conscious? Yes No 
Have you at times been provoked to the point that you have 
said or done things for which you were afterward 

ashamed? Yes No 



SCIENTIFIC PLACEMENT 217 

Do you ever blush? Yes No 
Do you think there are a large number of people with un- 
wholesome sexual morals? Yes No 
Can you understand people who tend to cling to their griefs 

and trouble? Yes No 
Have you had more than your share of worry? Yes No 
Have you at times made mistakes by being overly enthu- 
siastic? Yes No 

The forms of most temperament scales, personality inventories, 
and adjustment inventories are similar in general content. The 
Personality Inventory test, 1 for instance, attempts to measure 
personality by analyzing neurotic tendency, self-sufficiency, intro- 
version-extroversion, dominance, submission, self-confidence, and 
sociability. The Adjustment Inventory 2 test attempts to measure 
four separate phases of personal and social adjustment, as follows: 
home adjustment, health adjustment, social adjustment, and 
emotional adjustment. Here, too, the test is by means of questions. 

Tests designed to detect personal interests, such as the Specific 
Interest Inventory, 3 the Vocational Interest Blank, 4 and Aids 
to the Vocational Interview, 6 present more general information. 
The Specific Interest Inventory, for example, does not attempt to 
determine vocational fitness, but rather analyzes certain tendencies 
which appear to be essential to vocational activities. Most of the 
answers to its questions, therefore, involve an expression of likes 
and dislikes, which when analyzed are of aid to supervisors and 
instructors in more intelligently guiding individuals into fields of 
study and special interest. The Strong Vocational Interest Blanks, 
on the other hand, list various occupations, amusements, activities, 
and peculiarities of people and call for an expression of order of 
preference among certain activities and studies. 

Needless to say, few personnel managers or employment officers 
have either time or money to engage in vocational guidance work. 
In fact, far too often employers of labor are restricted in their 

1 BERNREUTER, ROBERT G., The Personality Inventory, Stanford University 
Press, 1935. 

8 BELL, HUGH M., The Adjustment Inventory, Stanford University Press, 
1934. 

8 BRAIN ARD, PAUL P., Specific Interest Inventory, The Psychological 
Corporation, 522 Fifth Ave., New York, 1932. 

4 STRONG, EDWARD K., JR., Vocational Interest Blank, Stanford University 
Press, 1930. 

5 Aids to the Vocational Interview, The Psychological Corporation, 522 
Fifth Ave., New York, 1933. 



218 THE TECHNIQUE OF SELECTION AND PLACEMENT 

utilization of well-tested intelligence and special tests for purposes 
of scientific selection and placement. 

In a Department of Labor study of the hiring methods of 224 
American factories, 1 referred to in Chap. XI, only 14 enterprises, or 
6.3 per cent of the total, by the end of 1932 had adopted any kind 
of intelligence, aptitude, or efficiency tests. Some of these tests 
were very simple ones in English, spelling, arithmetic, and geog- 
raphy. Others were somewhat more elaborate, such as a mechan- 
ical efficiency test for cabinetmakers of a furniture company, the 
Otis Test, O' Connor Number and Checking Test, Kent and Rosan- 
off s Word Association Test, and mechanical efficiency tests given 
to potential supervisors and executives of another company, an 
employment intelligence test for all office employees, and a finger 
dexterity test for all workers in the factory of a New England 
Company. Some firms, according to this study, require aptitude 
tests only for positions where employees handle expensive material 
which might be ruined through lack of skill. All firms where these 
tests had been adopted reported that results had justified their 
use. In another study, involving 153 reporting companies, 
inquiry showed that only 22 were using intelligence tests, 5 of which 
were manufactories, 5 department stores, and 12 in the general 
field of distribution. 2 It is significant to note that 10 of the 
22 firms are located in New York City. 

Doubtless some enterprises not actively engaged in manufactur- 
ing employ the use of tests in selection and placement more frequently 
than is indicated by the results of this study. These facts actually 
demonstrate a great deficiency in the use of valuable aids in selec- 
tion, and suggest that many companies have room for almost 
unlimited progress along these lines. Techniques enabling the 
analysis of special aptitudes and interests and the vocational 
guidance of workers have already developed to a point where the 
employer is offered valuable aid in the wise placement of men and 
women in productive channels. Thus, it is important for those in 
charge to know of the accomplishments that are being made and to 
take advantage of these new techniques wherever possible. 

Of what practical value are such checks and measurements 
to the employer? It must be frankly admitted that an acceptable 
appraisal is impossible. Too many combinations of traits and 

1 United States Department of Labor, "Hiring and Separation Methods in 
American Factories/' Monthly Labor Review, vol. 35, November, 1932, p. 1005. 

* FRYER, DOUGLAS, "Intelligence Tests in Industry," Personnel Journal, 
vol. 14, April, 1935, p. 322. 



SCIENTIFIC PLACEMENT 219 

capacities have to be taken as a basis for the scientific selection 
and placement of workers to permit of the reduction of selection 
to one set of tests alone. Numerous characteristics physical, 
mental, aptitude, personality, temperament, vocational interests 
plus environment make a worker either efficient and contented, or 
inefficient and unhappy. Recent studies have shown that the 
old belief that only people equipped with certain traits could fit 
certain occupations is untrue. In everyday life, a man is successful 
in the performance of a certain duty if he can supply the thing 
that is demanded. A man may be a successful machinist if he has 
interest, capacity, and experience in his work, although his tempera- 
ment may be such that he is hindered considerably in the exercise 
of this successful capacity. Another man, less skilled, with some- 
what less interest in his work, may be equally good, or far better, 
because of his emotional stability, loyalty, and cooperation. 

Personality and temperament tests, it has been suggested, deal 
with the least known and least tangible qualities of the worker. 
They are, however, no less valuable to the personnel director in 
his work if by their means it becomes possible, or more possible, to 
measure the qualities that a new applicant has to offer and, by such 
measurement, select and place him so that the task that he is 
assigned to perform calls for qualifications which he himself possesses 
and which can be used to the maximum advantage. What is true 
with regard to the placement of the new employee is also true 
of the older employee in respect to the many problems of discipline, 
promotion, transfer, and adjustment with which the personnel 
office is constantly asked to deal. 

Introducing the New Worker. There is an unwelcome strange- 
ness about a new job and a new organization. Sometimes, in the 
case of large establishments, the new worker drifts in unnoticed by 
any member of the official family except his immediate boss and, 
after a -time, silently leaves in a similar manner. Whether he is to 
be treated as a human being or merely as a machine is of vital 
concern to the wage earner. The human animal is a creature of 
impressions and impulses. With him first impressions are lasting 
ones. While he is seeking employment and in the initial days and 
weeks of his new job, his degree of sensitivity is high; his whole 
nervous system is likely to be keyed up. The treatment he receives 
in these first days and weeks will conduce either to good will and 
stability or to ill will and separation from the service of the company. 
The unfamiliar environment, the strange faces, and frequently 
the totally new kind of duties conspire to produce a condition 



220 THE TECHNIQUE OF SELECTION AND PLACEMENT 

of nervousness and a feeling of helplessness. Courteous treatment 
and sincere interest are never more appreciated than in such 
moments; conversely, never are discourtesy and the absence of 
interest more keenly resented. One of two methods of procedure 
is usually followed. A new worker is sent out as one of many 
to the foreman or departmental head with a card which reads, 
" Joe Newcomer, hired for machine six/' or he is properly introduced 
to the job and the personnel that surround it. In other words, 
he is just another "hand," or he is a new member of a dignified 
organization. 

In an increasing number of companies, the proper introduction 
of new employees to old ones, company policies, social activities, 
equipment, and the job is becoming an established function of the 
personnel department. Mutual understanding and a feeling of 
"at homeness" are cultivated at the start. Under such conditions, 
the new worker feels more like a human individual than a numerical 
digit. If the applicant is approved by the company physician, he 
is told by the interviewer that he has been accepted and Ls instructed 
when to report for work. At this time, there may be explained to 
him such points as the following: character of the personnel; use 
of hospital, dispensary, and restrooms; lunchroom facilities; length 
of the working day and rules governing overtime periods; use of 
the coatroom, locker, washroom, drinking fountain, and similar 
equipment; entrances and exits; time clocks; time and method of 
payment; pay office; recreational opportunities; rules governing 
tardiness, absence, and discipline; rest periods; employees' clubs; 
mutual-benefit association; bonus or profit-sharing plan; suggestion 
scheme; transfer and promotional opportunities and rules; educa- 
tional facilities; medical and safety service; rules governing tele- 
phone calls; grounds for discharge; employee representation plan 
and method of adjusting grievances and complaints; payroll entry 
place and procedure; and legal and financial help. All this informa- 
tion is usually contained in the employees' handbook or book of 
rules and instructions which is given to each new worker with the 
request that he familiarize himself with its contents. After this 
explanation, the new employee is taken to his department and 
introduced to his foreman and others who are to have supervision 
over him; they in turn introduce him to his fellow workers and to 
his job and its environment. 

The methods of introducing new employees vary. This is as it 
should be, since each organization has its own special conditions 
and is better off if it develops methods of personnel administration 



SCIENTIFIC PLACEMENT 221 

adapted to its peculiar needs. In many establishments, a represen- 
tative of the personnel office personally introduces the new worker 
to the supervisor under whom he has been assigned to work, and 
the supervisor accepts it as a part of his duty to give the man a 
courteous and genial reception. In some plants, the workman 
is given a card of introduction to the supervisor or foreman, or, at 
times, the foreman comes to the personnel office to meet and greet 
the new man. It is a common practice for the supervisor or his 
representative personally to introduce the new worker to his job, 
instructing him as to its peculiar characteristics and actual oper- 
ations. A special training department is sometimes operated to 
aid in preparing new employees for their positions. 

Follow-up Technique. The period of first follow-up ranges 
ordinarily from one day to one month. During this period, when- 
ever possible, a reasonable number of transfers are allowed in an 
effort to find the right place for each worker, if it has not been 
possible scientifically to place the worker permanently at the time 
of hiring. Department stores, telephone companies, and similar 
organizations, in which large numbers of workers are women, 
generally use some kind of a sponsor system under which certain 
individuals are assigned the duty of befriending and aiding new 
employees. This system is being applied in variously modified 
forms, such as is offered by the works council or employees' associa- 
tion in other types of industrial organization. 

The real follow-up system refers to the way in which the employer 
looks after and follows up the progress and accomplishments of each 
worker. In some companies, a definite system of follow-up is in 
use. After a few weeks of employment, usually at the end of 
30 days, the manager of personnel calls for the progress reports and 
other written records of production, punctuality, and similar 
items. Sometimes these reports will also include individual ratings, 
as is the case at Wm. Filene's Sons Company, a form copy of which 
was reproduced in Fig. 9. At other times, the report is sent in at 
the end of each 3- or 6-month period of employment and will 
usually contain information relative to promotion suggestions (see 
Figs. 17 and 18 following). The Douglas Aircraft Company has a 
report turned into the personnel office on each employee four times 
a year, and upon a basis of these recommendations discharges, 
transfers, and wage increases, as well as promotions are made. 
The R. H. Macy department store, through a special Personnel 
Review Committee composed of the assistant general manager, 
floor superintendent, department manager, employment office 



222 THE TECHNIQUE OF SELECTION AND PLACEMENT 

interviewer, and the training supervisor, studies the job performance 
of every Macy employee twice each year. After careful consider- 
ation of all available records concerning the individual, this com- 
mittee makes certain recommendations in reference to salary, 
position, replacement, additional training, medical follow-up, 
transfer, or promotion. The management feels this semiannual 
review is the " fairest way known of rating and compensating 



ANNUAL RATING AND SALARY REVIEW 
Data 



Name 



Store No. Occupation 



Dcpt. 



Each employee is to be rated by his immediate superior. You may make such 
recommendations for change in salary as you consider justified. Your recom- 
mendation requires the final approval of the Store Manager befcr* it becomes 
effective You are therefore under no circumstance* to promise your sub- 
ordinates any increase you may recommend. 



Date of entrance. 



Amount last increase 



Recommended increase 
SIGNED 



Standard wage for 
this occupation 




APPROVED- 



Head of division or pyramid 



Personnel superintendent 



Date Expense dept. 



Store manager 



Vice-president 



NOTE: When affixing your eignature, place the date beside it, as (John Jones 
9/12). This will tend to make return of rating prompt. 



FIG. 17. (Obverse.) 



employees because it considers all the facts and all the records of 
the individual's performance." 

With these individual reports and records in mind, the personnel 
manager usually will either conduct a personal conference with the 
worker or send to the worker a digest of the company's record of 
his work with any attached notifications, such as a notice of wage 
increase. If the worker is sent for, his own record is explained to 
him, and he has an opportunity to bring up any points concerning 
the organization which are not clear to him. Also if he chooses, at 



SCIENTIFIC PLACEMENT 



223 



these conferences he can discuss his job and talk over his com- 
plaints or any problems he may be confronting. 

Properly administered follow-up is of inestimable value. This 
is evident from the growing number of business and industrial 
organizations which are using this technique. A recent survey 
of 64 companies employing a total of 309,317 workers showed that a 
third of these concerns accounting for 33 per cent of the workers 



ANNUAL RATING 

MERCHANDISE AND 
SERVICE EXECUTIVES 


AND S^ 
Unusual 


^LARY R 

Excellent 


EVIEW 
Good 


Fair 


Poor 


Cooperation and leadership 












Personality and intelligence 












Sales and profit showing 












Operating- methods and expense 












Training and administration 












Merchandise 
executives 


Sales promotion 
and planning 












Business judg- 
ment and market 
ability 












Service 
executives 


Stock care and 
housekeeping 












Customers con- 
tact 












Promotional probability 












Comment on tmploj i*e ni promotional resource 


S,gne 
Apprc 


rl 





FIG. 18. (Reverse.) 

have definitely formulated follow-up systems and that 44 per cent 
of them have periodic personnel interviews. 1 

It is practically the only effective check on selection and place- 
ment and often the main basis for promotion. A man incorrectly 
placed is invariably discontented and discouraged, with the conse- 
quence that he is a source of constant friction, inefficiency, and lost 
time. Companies having progressive personnel policies make it their 
business to keep a watchful eye on the progress of a new worker, and 

1 PARKS, DONALD S., "1936 Personnel Trends," Factory Management and 
Maintenance, vol. 94, no. 12, December, 1936, p. 39. 



224 THE TECHNIQUE OF SELECTION AND PLACEMENT 

upon old ones as well. If the employee is not doing his work effi- 
ciently, he is given additional instruction and training. If he is 
not getting along smoothly with his departmental head, an effort 
is made to create a more congenial relationship or to effect $ transfer. 
If he displays a lack of capacity for the job or ability far above the 
requirements of the job, he is transferred to a position more nearly 
suited to his powers. 



PART IV 
THE MAINTENANCE OF PERSONNEL 



CHAPTER XIII 

LABOR TURNOVER 

What Is Labor Turnover? Throughout the pages of our dis- 
cussion thus far, repeated reference has been made to the difficulty 
of maintaining a stable working force. No longer can there be 
any question as to the importance of proper personnel maintenance. 
Instability obtains with varying degrees of severity in each move- 
ment of the general business cycle. " Labor instability," it has 
been observed, "is regarded by all those who have given any serious 
consideration to the problem as one of the maladjustments of our 
industrial life, wasteful and destructive of the potential man-power 
of the nation and a serious obstacle to the complete utilization of 
the country's productive forces." 1 

While there still exists considerable lack of agreement as to just 
what labor turnover is, it can be defined in general as the influx and 
exit of individuals into and out of the working force of an organiza- 
tion over a specific period of time. The United States Department 
of Labor has defined labor turnover as "the replacements in a work- 
ing force made necessary by employees leaving the service." 
Generally speaking, this term refers to the total number of employ- 
ees that are hired during any given period of time in order to 
maintain the number of employees actually required by the organi- 
zation. Thus the concept of labor turnover takes into consider- 
ation the extent to which separations and accessions take place 
through causes such as dismissal, layoff, discharge, and voluntary 
withdrawal; its rate serves as a quantitative measurement of the 
instability of the working force. 

Stabilization of the working force is now regarded by intelligent 
management everywhere as a primary essential in the efficient 
operation of all types of organizations. Those who are responsible 
for the management of labor relations are cognizant of the fact that 
effective methods of recruiting, selecting, and placing the labor 
force avail but little in the absence of adequate ways and means of 
retaining those who have been selected and placed in an organiza- 
tion, often after intensive training periods and at considerable cost. 

1 BBISSBNDEN, P. F., and EMIL FHANKEL, Labor Turnover in Industry, p. 1. 

227 



228 THE MAINTENANCE OF PERSONNEL 

A general discussion of the problem of labor instability would 
necessitate a consideration of the larger phases of the movement of 
industrial and civil personnel as well as the more restricted phase 
of labor placement in given organizations. To the larger phases 
of the movement, the term " labor mobility" is given. It has 
reference to the whole phenomena involved in the adjustment of 
the supply of labor to the demand for it, and is of great importance 
from the point of view of society, as well as from that of the shifting 
of workers. 

From the standpoint of the individual organization, however, 
the narrower phase of the problem is more vital. This is what has 
been generally referred to as " labor turnover. " As stated above, it 
$neans the number of employees who leave or enter the service of an 
organization during a given period. There are many who insist 
that the term labor turnover is more correctly used in reference to 
the replacements made necessary by the movement of laborers from 
one plant to another, or which are required to maintain the present 
working force. This difference of opinion is analyzed at length 
below. The general problem of labor mobility is a serious one 
requiring social control. The narrower problem of labor turnover, 
on the other hand, is primarily a problem in personnel administra- 
tion and is largely the concern of the individual employer. It is 
with the latter problem that we are here concerned. 

Undesirability of Complete Stability of the Working Force. Any 
discussion of the problem of labor instability must be prefaced with 
the caution that within certain limits labor mobility may be regarded 
as one of the phenomena of modern industrial life. A certain 
amount of shift in the personnel of an establishment must be 
accepted as normal and necessary, if not indeed inevitable and desir- 
able. Such movements of the labor force will probably continue 
as long as men and women desire to improve their standard of living 
by seeking larger incomes, necessarily face the exigencies of Ill- 
health and death, and are victims of the disturbing ebb and flow of 
alternating expansion and contraction in industrial and business 
activity. The desirability of these shifts in the personnel of an 
organization may not seem so obvious. Yet, there is a consensus 
of judgment among business executives to the effect that new blood 
usually has a stimulating influence upon any enterprise and that 
when employees have been with a company for an extended period 
they frequently come to regard themselves as possessors of an indefi- 
nite tenure of employment, a vested interest in the job, regardless 
of sustained efficiency. For this reason, it is sometimes desirable, 



LABOR TURNOVER 229 

both from the standpoint of the management and of the employees 
themselves, that workers make a change in their employment rela- 
tions. The fundamental question in an analysis of the problem 
of labor instability is, therefore: What constitutes the maximum of 
shift in the personnel which may be accepted as most compatible with 
the best interests of both the employer and the employee and how can 
this shift be measured? 

Methods of Measuring Labor Turnover. Many different meth- 
ods have been developed for the measurement of labor turnover, 
and considerable controversy has ensued between the exponents 
of the various methods. The method of measurement invariably 
depends upon the employment manager's conception and definition 
of labor turnover. Inasmuch as most of those methods involve 
complicated computations they have not come into general use. 
Among the more generally accepted theories are the following: 

1. Basis of Separations. Turnover is here considered as the 
relationship between the total number of separations from the 
company from all causes during a specified period of time (as month, 
or year) and the average number employed during this same period 
of time. Expressed in terms of a simple mathematical formula, its 
rate is determined as 

m u i \ (separations) 

T (turnover rate) = F (average working force) 

This method of computation was suggested first by the Com- 
mittee of National Employment Managers Conference at Rochester 
in 1918, and since then, its general method of computation has been 
accepted by the majority of organizations at present making labor 
turnover analyses. A survey of 195 companies recently made 1 dis- 
closed the fact that two-thirds (66 per cent) of all those reporting 
were using this method for determining the rate of labor turnover. 
Those who conceive of turnover in terms of separations from service, 
whether because of resignation, discharge, or layoff, suggest that 
regardless of the cause the employer suffers a financial loss in the 
case of every worker who leaves, and from the social point of view 
every separation entails the possibility of loss of earning power and 
morale. 

2. Basis of Replacements. Here the turnover rate is defined as 
the relationship between the actual number of replacements on the 
working force during a given period of time and the average number 

1 SCOTT, WALTER D., ROBERT C. CLOTHIER, and S. B. MATHEWSON, Per- 
sonnel Management, p. 457. 



230 THE MAINTENANCE OF PERSONNEL 

employed during this same period. Expressed mathematically, it 
is determined as 

m , . R (replacements) 

T (turnover rate) = F (average working force) 

Labor turnover is thus regarded as comprising the total number 
of employees hired during a given period to replace those who have 
terminated their employment relation or whose services have been 
terminated by the management. This method of computation 
was first suggested by Prof. Paul Douglas in 1919. l It is based 
upon the theory that from a business standpoint separations which 
are not replaced cost nothing, and if unavoidable, even accrue to 
economic advantage. 

3. Basis of Distinction between "Avoidable" and "Unavoidable" 
Separations. Some employment managers have insisted that these 
simple formulas do not tell the whole story and are therefore inade- 
quate. In support of their contention, they point out that fre- 
quently a large number of the total separations for any given period 
are not attributable to any fault of the employer or to any internal 
conditions of the plant or industry. As already stated, a certain 
amount of turnover is inevitable. Sickness, old age, death, family 
conditions, interdepartmental transfers, and seasonal and cyclical 
fluctuations in business necessarily contribute to the percentage of 
separations. These conditions, it is contended, are beyond control 
of the employer. Therefore, separations should be classified into 
"avoidables," and "unavoidables." The formula would read as 
follows : 2 

T _ S - (M + U) 
i j 

Where T =* labor turnover 

F average working force 
S = total separations 
M = interdepartmental transfers 
U = unavoidable separations 
Or, if transfers are eliminated from consideration: 

T S - U 
i = p~~ 

It is doubtful whether in actual practice there is much to be 
gained from the classification of separations into "avoidables" 

1 DOUGLAS, PAUL H., Bulletin of Taylor Society, August, 1919. 
1 First suggested by Daniel Bloomfield in Industrial Management, August, 
1919, 



LABOR TURNOVER 28 1 

and "unavoidables." The experience of American industries indi- 
cates that such a classification is at best quite arbitrary and conse- 
quently unsatisfactory, if not misleading. By artful interpretation 
or manipulation of data, any firm can classify separations according 
to its needs or the wishes of its own conscience. Moreover, it is 
extremely difficult to separate " avoidable" from "unavoidable" 
terminations. When are discharges avoidable or unavoidable? 
In some cases, discharges are plainly unavoidable, but in most 
cases it would not be difficult to prove either that they are avoidable 
or unavoidable, depending upon whether the matter is viewed from 
the employer's standpoint or from that of the worker. Certain 
firms regard all discharges as unavoidable. They may, however, 
be regarded as avoidable, resulting from deficiencies in personnel 
policies, such as poor methods of recruitment, selection, and place- 
ment; inadequate training facilities; the absence of sufficient trans- 
fer and promotional opportunities ; and unintelligent administration 
of human relations. A certain percentage of separations may in 
periods of business recession be classified as " unavoidable," yet, it 
is apparent from experiences of certain concerns that scientific 
control of production makes a considerable percentage of such 
separations " avoidable." Again, sickness and ill health are classi- 
fied by some companies among the "unavoidables," but they are 
avoidable at least to the extent that sanitary conditions of employ- 
ment, periodical medical examinations, first aid, medical service, 
safety education, and education in personal hygiene are applied to 
reduce such separations to a minimum. 

Looked at strictly from the standpoint of the employer, labor 
turnover is always identical with labor maintenance by replacement. 
Separations and hirings do not make allowance for the expansion 
and contraction of industry and business. In periods of industrial 
expansion, the aggregate working force is increased, and, in periods 
of business depression, the working force must be reduced. It is 
urged that these are conditions over which the employer can exercise 
little or no control, and to this end other methods of computation 
have been devised. 1 On the other hand, the method of measuring 
labor turnover in terms of separations not only reflects something 
of the significance of the changes in personnel to the employer but 
also suggests the losses entailed for the employee and society. 
That is, separations present a general picture of the whole problem. 

1 See, for instance, the method of computing labor turnover as first recom- 
mended by Boris Emmet in "Turnover of Labor/' Bulletin of the Federal Board 
of Vocational Education, November, 1919. 



232 THE MAINTENANCE OF PERSONNEL 

From our own point of view, it would seem that the method of 
measurement is far less important than an accurate analysis of 
responsible factors and that any of the above methods is satis- 
factory, provided the accompanying analysis is sufficiently adequate 
and accurate to indicate causative conditions and point *out an 
approach to workable solutions. If we assume that such an 
analysis "-will be made, our preference is for computation on the 
basis of separations. 

Labor Turnover Computations of the Department of Labor. 
Each employer may choose his own individual method of computing- 
labor turnover, but his data will be of little value to him in making 
intelligent analyses unless in their computation procedures have been 
used which will permit the comparison of his own turnover experi- 
ences with those of other companies and industries. In this respect, 
the United States Bureau of Labor Statistics has been doing signal 
service in its attempt to standardize the procedure for computing 
labor turnover, thus making analysis of comparable data both 
possible and profitable. 

To this end the bureau publishes in its Monthly Labor Review 
data on labor turnover covering over 5,000 manufacturing establish- 
ments, representing 144 different lines of manufacture and employing 
over 2,000,000 workers. 1 Each month, in answer to questionnaires, 
the bureau receives information on the following: 

1. Number of separations during the period (previous month). 

a. Number of quits (that is, termination of employment, usually initiated 
by worker because of desire to leave, but at times due to his physical 
incapacity). 

6. Number of discharges (that is, work termination at will of employer 
because of some fault on part of worker). 

c. Number of layoffs (that is, termination of employment at will of employer 
without prejudice to worker. Short definite layoff with worker's name 
left on payroll is not counted as separation). 

d. Total separations (termination of employment of any of the three 
kinds: quits, discharges, and layoffs). 

2. Number of accessions during period (that is, number of new employees hired 
or old employees rehired). 

3. Number of factory workers on payroll (these data obtained to allow com- 
putation of the average number on payroll). 

a. At beginning of period. 
6. At end of period. 

1 See " Standard Procedure for Computing Labor Turnover," United States 
Bureau of Labor Statistics, Bulletin 616, Handbook of Labor Statistics, 1936 ed. f 
pp. 801-811. 



LABOR TURNOVER 



233 



From these data, the items of separation and accession are 
divided by the average payroll in computing the rate of various 
phases of turnover per 100 employees for the month. The general 
rates are always computed from the grand total. All turnover rates 
are "weighted" according to the size of establishment, as measured 
by the number of employees. If an equivalent annual rate is 
desired, the monthly rates are multiplied by fractions approximating 
twelve units, depending upon the number of days in the month in 



MONTHLY LABOR TURN-OVER RATES 

IN REPRESENTATIVE FACTORIES 
COVERING 144 INDUSTRIES 



RATE PER 
IOO EMPLOYEES 



1929-1937 




1929 1931 1933 

SOURCE i UNITED STATES DEPARTMENT OF LABOR 



1935 



FIG. 19. 

question (multiply by 11.77, if 31-day month; 12.17, if 30-day 
month; 13.04, if 28-day month, etc.). Separate computations are 
made showing monthly separation and accession rates for the auto- 
mobile, boot and shoe, brick, cotton, foundries and machine shop, 
furniture, iron and steel, men's clothing, sawmill, and slaughtering 
industries. Thus, personnel departments of individual establish- 
ments within these ten industries are greatly aided in their analysis 
of labor turnover by information available through the Department 
of Labor in Washington. The above chart presents the bureau's 



234 



THE MAINTENANCE OF PERSONNEL 



labor turnover rates per 100 employees in representative American 
factories between 1929 and 1937. 

Turnover Records and Their Analysis. The first step in an 
analysis of labor turnover is the establishment and maintenance of 



UNION 
rot 

DIVISION 


OIL COMPANY OF CALIFORNIA 
LABOR TURNOVER ANALYSIS 

- - 




f 


ROM 


193 :TO 


19 


3^ 










FQRCI, 
LAST 
MONTH 


END OF 
THIS 

MONTH 


HIRED 


RELEASED 


% TURNOVER 
THIS PERIOD 


U'SKM 










TOTAL 

MALfS 
FEMALE* 

REASON 
Oft LOU* 
NKNOWM 
NAVQIOABLE 
ISCHARGt 
WORK 

OTHER JOS 
HEALTH 

yfAOE 
TOTAL 

LENCTM Of 
SERV ICE 








































TOTAL 
TOTAL 




































LSS TMA I VR. 






































1 TO 6 V 






































3 TO 5 Y 






































1 TO 10 Y 






































1Q TO 15 v 






































1,5 TO 20 Y 






































oven 20 a. 






































TOTAL 












































































MMIMS 






































THAN ONt YEAR 















































FIG. 20. 



adequate turnover records. Figures 20 and 21 present forms 
illustrative of the types of analyses being carried on today. Spe- 
cific instructions are issued with each copy of the form in order that 



LABOR TURNOVER 235 



INSTRUCTIONS TO BE FOLLOWED 
IN COMPLETING LABOR TURNOVER ANALYSIS FORM 

1. FORCE END OF MONTH : is to bt taken as the total working force on the last day of the month excluding 
temporary and/or casual employees. 

2. HIRES: is to include all persons hired during the month except persons employed on a temporary basis and 
employees transferred from some other Union Oil Company department or division unless such transferees have 
been classed as temporary employees and are made permanent only when transferred t this department. 

3. RELEASED: to include all employees leaving the service of the company for any reason whatsoever and is not I* 
include employees who are transferred to another Union Oil Company departttKnt *r iivition. 

1. % TURNOVER THIS PERIOD: turnover is to be figured on an annual basis and the following formula a t* 
beussda 



during M 

Avg No. on Force during Month 

Avg. No. on Force during Month-is to be taken as 

Forcfe end of this month plus Force end of last month 
2 

5. % TURNOVER FROM JAN. 1 : is the average cumulative turnover from Jan. i or the sum of the monthly 
turaover figures, as calculated in (4), divided by the number of months from Jan. 1. 

6. TRANSFERS TO' is to include all Union Oil Company employees transferred into this division or department 
from some other division or department. 

?, TRANSFERS FROM .' is to include all Union Oil Company employees transferred from this division or depart* 
ment to some other division or department. 

8. FORCE INDEX: is an index of the stable working force and is the per cent of employees in the force at the 
end of the month who have been in the service of the Company one year or more. 

0. TEMPORARY WORKERS' is to include all persons hired with the understanding that their employment is 
of a temporary nature. Persons employed on a temporary basis and later made permanent employees are to 
be classed as new hires as of the date that they are made permanent. 

10. REHIRES: to include all persons hired who have had previous service with the Company 

REASON FOR LOSS 

Oar* should be taken to determine the exact cause of all terminations so that they may be properly classified In 
recording reasons for loss the following definitions are to hold : 

UNKNOWN; (voluntary leaves only) to include only employeeo leaving without notice and/or who do not 
give any reason for leaving. Such caset should be kept at a minimum. 

UNAVOIDABLE; to include 

1. Death, regardless of oauSe 

2. Marriage (women) 

3. Sickness in family 

4. Retirement 

5. Leaving the district 

6. Return to school 

DISCHARGE; to include all discharges for ue such as 

1. Violation of Company rules 

2. Insubordination 

8 Irregular attendance 

4 Dishonesty 

5 Not suited for position held 

6. Failure to pass E. B F physical examination 
7 Drunkenness 

8. Laziness 

9. Poor workmanship 
10. Disloyalty, etc. 

NO WORK; to include all cases of permanent workers laid off because of laek of work. 

DISLIKE OF TASK; (voluntary leaves only) to include all cases of employee leaving because of 
1 Unsatisfactory working conditions 
2- Dissatisfaction with type of work. 

3. Dissatisfied with supervision 

OTHER JOB; to include only cases where the employe* leaves for tht express purpose of 

1 To go into bubintas for self 

2 To accept employment of a different nature with another Company because of better opportunities fw 
future 

3 To accept position of a similar nature with another Company because of better opportunities for 
advancement 

HEALTH, to indude all cases of employees leaving because of ill health or injury regardless of the origin *T 
same. 

WAGE; to include all case* of employees leaving because dissatisfied with the pay they are receiving whether 
or not they are taking a position elsewhere 



Fio. 21. 



236 



THE MAINTENANCE OF PERSONNEL 



strict uniformity can be gained in classification and statistical 
computation. Instructions for filling in the form cover such points 
as definition of the working force at end of month, hires, and 
releases; a computation of the percentage of turnover; the method 
of determining transfers to and from the company; the force index; 
number of temporary workers; and rehires. The reverse side of the 
form allows for a presentation of a detailed analysis of separations 
from the company; it follows the classification of a cause pattern 
suggested by the Bureau of Labor Statistics, except for certain 
modifications, which quite obviously are advantageous to individual 
organizations and depend largely upon size and type of activity. 
These points of information are covered in detail in Fig. 21. 

The extent to which these or similar records are being used 
today throughout the country in an attempt to diagnose intelli- 
gently the reasons for constant labor turnover is revealed in a 
study conducted by the Bureau of Labor Statistics. 1 A total of 224 

TABLE 4. NUMBER OF ESTABLISHMENTS RECORDING REASONS FOR SEPARATION 

AND NUMBER OF ESTABLISHMENTS ATTEMPTING TO ADJUST DIFFICULTIES 

AND RETAIN EMPLOYEES 1 



Industry 


Number of establishments 


Record- 
ing 
reasons 
for 
leaving 


Not re- 
cording 
reasons 
for 
leaving 


Making 
an at- 
tempt 
to adjust 
difficul- 
ties 


Not 
making 
an at- 
tempt 
to adjust 
difficul- 
ties 


Total 


Automobiles and parts 


10 
7 
17 
42 
13 
30 
9 
10 
14 
14 


1 
6 
6 
3 
7 
11 

5 
5 
14 


10 
9 
18 
42 
11 
35 
8 
9 
15 
10 


1 
4 
5 
3 
9 
6 
1 
6 
4 
18 


11 
13 
23 
45 
20 
41 
9 
15 
19 
28 


Clothing 


Food products 


Iron and steel and their products 
Lumber and its products 


Miscellaneous 


Petroleum refining . . 


Boots and shoes 


Textiles North 


Textiles South 


Total 


166 
74.1 


58 
25.9 


167 
74.6 


57 
25.4 


224 
100.0 


Percentage of total 





1 SOUHCHS: United States Department of Labor. 

1 United States Department of Labor, Bureau of Labor Statistics, Monthly 



Labor Review, vol. 35, November, 1932, pp. 1005-1015. 



LABOR TURNOVER 237 

establishments representing 30 industries and employing 387,826 
workers were visited during the course of the investigation. Results 
showed that 166, or 74.1 per cent, of these companies maintained 
some sort of an interview with the employee upon leaving, and 
obtained from him, if possible, his account of the severance of 
employment relations. As Table 4 further shows, however, a 
fourth (58) of the 224 establishments made no attempt either through 
labor turnover sheets or other forms to keep a record of the reasons 
for leaving. 

Percentages of labor turnover have little practical value unless 
based upon adequate, reliable records uniformly filled in and 
accompanied by careful critical analysis. It is not sufficient to 
know what the percentage is, or even that the employee was dis- 
charged for dishonesty. The management must know tho reasons 
for the turnover rate since a knowledge of the relative importance 
of contributing factors in employee separations can be of great 
value in formulating labor policies. Thus the percentages must bo 
analyzed with regard to the importance Of voluntary quits, dis- 
charges, and layoffs. An even more minute analysis can be made 
if adequate records are available. Turnover by departments may 
be examined critically by determining turnover rates for each 
department in the organization, and by presenting the reasons for 
the terminations. In this way it is quite possible to discover those 
departments of the organization in which turnover is excessive, and 
to establish a correlation between their percentages and causative 
conditions. This has frequently proved helpful in eliminating 
causes of chronic turnover in departments where disagreeable con- 
ditions of employment, either physical or personal, prevailed. 
Such procedure is useful in segregating a major cause of separation, 
such as length of service, mentality, sex, age, training, type of 
work, and nationality from many other factors of less importance, 
thus making possible the establishment of corrective or preventive 
devices. In a recent analysis of labor turnover of a large public 
utility company, the six major departments of the organization 
showed remarkably different rates. Careful analysis of these data 
finally revealed that the heavy turnover rate was attributable to a 
relatively small number of new employees who came into the 
company to stay for only a very short period. This was evident 
from the complete analysis which established the fact that the 
rate for those with 1 year or more of service was 14 per cent and 
that of employees with one month of service was 1,062 per cent. 1 
1 SCOTT, CLOTHIEB, and MATHEWSON, op. tit., p. 468. 



288 



THE MAINTENANCE OF PERSONNEL 



TABLE 5. LABOR TURNOVER IN Six MAJOR DEPARTMENTS IN A PUBLIC UTILITY 

COMPANY 1 



Department 


Average number 


Number exits in 


Annual turnover 


number 


employees 


3 months 


rate 


1 


302 


50 


66 


2 


242 


60 


99 


3 


110 


2 


105 


4 


73 


22 


120 


5 


200 


91 


182 


6 


478 


406 


338 


Total 


1 405 


658 


187 











1 SCOTT, CLOTHIER, and MATHEWBON, op. cit. t p. 467. 

Such situations demonstrate that immediate steps need to be taken 
to curb the weaknesses of selection and placement. Similar 
analyses may be made of the relative importance of occupations, 
age, sex, education, and other characteristics. Control of the 
problem is inconceivable without such detailed analysis. 

Extent and Cost of Labor Turnover. Although an increasing 
amount of information is being accumulated indicating the extent 
and cost of labor turnover, adequate statistical evidence is still 
lacking. A sufficient number of studies have been made recently 
to demonstrate that labor turnover is a significant factor in overhead 
and operating expense throughout all types of organizations. As 
suggested above, the rate varies considerably with the changes in 
business conditions, tending to drop to a low level in periods of 
business depression and to rise to a high level in times of expansion. 
In periods of recession, such as 1907-1908, 1913-1914, 1921-1922, 
and 1930-1934, the rate of labor turnover even in establishments 
which normally experience considerable difficulty in maintaining a 
stabilized working force falls to 50 per cent or below. During 
normal business years a labor turnover of 300 per cent or more is 
common in some industries and organizations. In years of abnor- 
mal industrial and business activity, the rate of labor turnover has 
tended to climb to excessive levels, a rate of 500 to 1,000 per cent 
being experienced during the expansion period of the World War. 

Management is realizing that high labor turnover is extremely 
costly, and is bending every effort possible to curtail this waste. 
Reference to Fig. 19 will show the net results of the efforts of 
over 5,000 representative manufacturing firms. These compa- 
nies, employing a total of over 2,450,000 workers in December, 
1937, experienced total annual separation rates of 45, 29, 48, 51, 



LABOR TURNOVER 239 

45, 49, 43, 40, and 53 per cent respectively between the years 1929 
and 1937 inclusive. During these same years these companies 
added an average of between 19 and 63 men for every 100 men 
employed. 

Turnover also varies with the type of enterprise and industry. 
In ail the years that the Bureau of Labor Statistics has been com- 
puting rates, except in 1933, the iron and steel industry has shown 
both the lowest separation and lowest accession rates of any of the 
ten groups of industries covered (automobiles, boots and shoes, 
bricks, cotton, foundries, furniture, iron and steel, men's clothing, 
sawmills, and slaughtering and meat packing). In five of these 
industries hiring and separation rates exceeded 50 per cent each 
year between 1931 and 1935. l In other words, during each year 
in this 5-year period, in five of the major industries in the United 
States 50 or more workers were separated out of each 100 employed 
and 50 more were added either as rehires or as new employees. 2 

Further reports covering the last months of 1936 3 show that 
variations in employment during these months have been much 
greater in automobile and body manufacturing plants than in plants 
manufacturing automobile parts and equipment. These records 
show that 33 workers out of each 100 employed in the automobile 
plants were separated from the payrolls during the last 2 months of 
the year (1930), while only 8 out of each 100 were dropped from 
the payrolls of equipment plants. This large drop in automobile 
workers, most of which did not represent a permanent layoff, 
was doubtless due to the interruption caused by a change in car 
models. On the other hand, some well-established and financially 
strong organizations have remarkably low turnover rates. The 
Standard Oil Company of California, for instance, had 12,423 
employees in the parent company at the end of 1936. Of the total, 
7,946, or 64 per cent, had 10 years or more of continuous service; 
3,189 of these had been with the company for 10 years, 2,840 for 
15 years, 1,298 for 20 years, 442 for 25 years, 148 for 30 years, 22 
for 35 years, and 7 for 40 years. 4 

The total cost of this constant change in personnel is beyond all 
computation, yet it is none the less real to each employer, employee, 
and to society as a whole. Losses to employers are perhaps the most 

i Department of Labor, Bulletin 616, 1936, p. 806. 
"/bid. 

8 Monthly Labor Review, vol. 43, December, 1936, p. 1483. 
4 HELD, W. J., "Why I Like to Work for My Company," Forbes Magazine 
Reprint t Standard Oil Company of California, 1937. 



240 THE MAINTENANCE OF PERSONNEL 

obvious. Every employee who is recruited, selected, and placed 
by a business establishment represents a financial outlay, including 
the expense of hiring, instructing, training, and breaking him in. 
Following is an estimate of loss experienced by a boiler manu- 
facturing company each time a worker leaves the company's 
employment: 1 

Loss in production between decision to quit and actually 

quitting $10.00 

Loss of production between time former employee left and 

new employee starts 48 .00 

Employment office salary cost handling leaving trans- 
actions 1 . 87 

Employment office salary cost hiring new employee .... 3 . 75 

Medical division cost, physical examination 1 . 10 

Pay roll and accounts salary cost, leavers and replace- 
ments 5 . 00 

Shop office salary cost, leavers and replacements 2 . 00 

Supplies cost, stationery, photographs etc., for new 

employees . 50 

Loss in production, spoilage by new employee 10 .00 

Loss of material, spoilage by new employee 5.00 

Extra supervision required, floor space, equipment, etc., 
required to bring employee to point of standard pro- 
duction 7.00 

Rent, light, heat, office of employment department ' 1 .00 

Medical division cost, frequency of accidents among new 

employees above normal . 25 

Total $95747 

Every change that occurs in the personnel of an organization 
entails a financial loss. "This constant flux and change in organ- 
ization represents a tremendous hindrance to production and profits. 
It signifies a heavy investment, rather expense, for unproductive 
effort. It is an outgo that bears little or no relation to output/ 72 
If we assume the average turnover rate to be the very low figure of 
25 per cent among over 32,000,000 gainfully employed in the manu- 
facturing, transportation, trade, personal service, and clerical occupa- 
tional classifications alone (as presented by the 1930 federal census), 
some 8,000,000 workers are changing their employment on the aver- 
age of once each year. If the turnover of these workers involves a 
nominal loss to their respective employers of only $10 each, the loss 
to employers alone would be approximately $80,000,000 annually, 

1 Chamber of Commerce of the United States, Department of Manufacture, 
Balancing Production and Employment through Management Control, March, 
1930; cited by J. E. Walters, in Applied Personnel Administration, p. 221. 

2 "Training Service," United Stales Department of Labor y Bulletin 5, 1919, 
p. 5, 



LABOR TURNOVER 241 

If the cost averages $50, $400,000,000 each year is represented; at 
$100 per worker, the employer cost would be roughly estimated 
at $800,000,000. Labor turnover among some unskilled occu- 
pations has been estimated to average approximately $50 per 
worker. In instances where intensive training periods are required, 
or where the nature of the work makes the breaking in of new 
employees very expensive, 1 the aggregate cost is indeed very high. 
The present annual cost of labor turnover to employers in the 
United States may be estimated conservatively at approximately 
$500,000,000. In addition there are the tremendous losses sus- 
tained by the workers themselves in wages and by the public 
through decreased productivity, which means a correspondingly 
lower total national income. 

The principal financial losses incurred by the employer through 
labor turnover are suggested above in the list of items of turnover 
cost taken from a boiler manufacturing company. It follows that 
the cost of labor turnover per man to the employer will vary with the 
amount of previous training, the degree of skill required in the job 
and acquired by the worker, and the natural aptitude and adapta- 
bility of the employee. The experience of a large number of firms 
indicates a cost of from $30 to $100, depending upon numerous 
factors, such as the complexity of the operation; the degree of 
standardization; the nature of materials and equipment used; and 
the skill, experience, and intelligence of the now worker. In the 
shoe industry, for example, the cost of training an inexperienced 
man for cutting upper leather in a well-managed shop has been set 
at $576; for a semiexperienced man, $450. To install an experi- 
enced man in a different factory costs $50. 2 

It is a recognized fact that new workers who are more or less 
unfamiliar with the processes and operations peculiar to a given 
plant or office contribute greatly to the increased outlay because of 
damaged materials, spoiled work and breakage of machines, tools, 
and equipment. On account of this same unf amiliarity new workers 
tend to be less efficient than old ones and to slow up production. 
Moreover, labor turnover tends to breed inefficiency, and the new 
accessions to the labor force may include a considerable number 
whose skill and competency have been depreciated through habitual 
turnover. Finally, statistical studies of the frequency and causes of 
industrial accidents have proved conclusively that the accident 

1 Chamber of Commerce of the United States, The Department of Manu- 
facture, Making Labor Turnover Records Comparable, 1929, p. 2. 

2 Federated American Engineering Societies, Committee on. Elimination of 
Waste, Waste in Industry, p. 14. 



242 THE MAINTENANCE OF PERSONNEL 

frequency rate tends to be excessively high among new employees, 
being especially pronounced during the first few months of 
employment. 

Although less tangible, the costs which labor turnover entails 
for the wage earn car arid society are intimately related to the 
costs which accrue to the employer. The costs to the individual 
employee and society are difficult to measure in terms of dollars 
and cents, but they are real, comprising chiefly economic and social 
demoralization of the worker, with the resultant dependence upon 
private or public charity. That the morale of the working force of 
the nation is greatly lowered through excessive labor turnover can 
scarcely be questioned. Some writers on the subject have found 
consolation in the fact that in most factories at least two-thirds of 
the working force "is relatively stable and that the rate of turnover 
is least among the skilled and higher grades of semiskilled labor, 
whose impairment of morale would do the most injury.' 71 But it 
may bo appropriate to suggest that there is little consolation in 
this fact for the unskilled workers, upon whom rests the incidence 
of unemployment due to labor turnover, and who, both by virtue of 
this fact and another, namely, that their share in the dividend of 
industry is smallest, are the least able to bear the burden and must 
fall back upon society for financial relief. 

Common laborers, lower grades of semiskilled workers, boys and 
girls, wage-earning mothers, and the physically and mentally incapa- 
ble are the first to feel the two-edged sword of discharge and layoff. 
Among these dependent workers labor turnover tends to breed more 
labor turnover, and escape from the vicious circle is difficult. 
Frequent loss of employment and the inability to find new jobs 
conduce to irrepressible discouragement, continued idleness, and the 
cultivation of laziness and indifference. The unemployed worker 
suffers through loss of income during the interval between jobs, 
frequently must incur the expense of traveling to another community 
in search of employment, pay a fee to some exploitative private 
employment agency, and face the normal penalties of idleness. 
Almost invariably, idleness results in loss of skill, efficiency, and 
ambition, which further complicates the difficulty by making it 
almost impossible for the workers to find employment. The normal 
consequence is that such individuals become economically and 
morally deficient, tending to join the already too large army of 

1 "Labor Turnover, Its Cost to Employer and Employee," Council of 
National Defense, Section of Industrial Service, Mimeographed Report, Jan- 
uary, 1918, p. 3. 



LABOR TURNOVER 243 

casual laborers. Or else they swell the ranks of the professional 
migratory laborers who live a parasitic existence in auto-trailer or 
transient camps. For their subsistence, they depend upon the 
charitable members of organized society or the tax-supported funds 
of local governments. Sometimes, they take advantage of tempo- 
rary inducements, in the form of high wages, which are periodically 
offered by certain industries in times of great industrial activity. 

Even when such workers succeed in finding now employment 
and are rescued from unpleasant consequences of unemployment, 
the losses they sustain are considerable. These arise from the 
impairment of skill in the occupation to which they fire accustomed 
and from the necessity of accepting employment in trades or occu- 
pations which are foreign to them. Strange occupations, moreover, 
mean a reduction in earnings during the period of adaptation or 
training; a probable increase in accident risk resulting from un fa- 
miliarity with new equipment, machinery, and processes; and the 
danger of discharge for incompetence. Work is of ton found in a 
distant community, thus involving expense in moving the family 
and household effects. In all cases, when labor turnover results in 
unemployment for an extended period, there develops the necessity 
of the wife and children going into industry to provide the means of 
subsistence, the depletion of whatever savings have been accumu- 
lated during the period of steady income, the accumulation of debts, 
the resort to boarders and lodgers whose presence destroys the 
privacy of the home. 

Causes of Labor Turnover. If an intelligent solution of the 
problem of labor turnover in a given industry, individual establish- 
ment, or a single department of an establishment is to be forth- 
coming, it will be necessary to make a careful analysis of the 
underlying causes of each of the constituent factors resignations, 
layoffs, and discharges. Merely to discover the relative importance, 
of each in the total volume of terminations will yield no basis for 
an intelligent approach to the reduction of labor turnover, unless 
there is an attempt to discover also the reasons for voluntary quits, 
layoffs, and discharges. 

Elsewhere, the causes of labor turnover have been classified as 
personal, industrial, and social. 1 The personal causes were divided 
into physiological and psychological conditions, the former includ- 
ing such items as illness and death, and the latter such items as 

1 WATKINS, GOBDON S., Introduction to the Studij of Labor Problems, p. 254. 
Also see the National Industrial Conference Board's Study on Lay-off and Its 
Prevention, 1930, by Magnus W. Alexander, pp. 10, 38. 



244 THE MAINTENANCE OF PERSONNEL 

wanderlust, bad disposition, family ties, and desire for improvement 
of the standard of living. The industrial causes comprised two 
groups. In the first were deficiencies in personnel procedure, such 
as poor methods of recruitment, selection, and placement, the 
absence of adequate financial and nonfinancial incentives; unfavor- 
able conditions of employment, unregulated production, autocratic 
management, and lack of training facilities. The second group of 
industrial causes consisted of general business conditions, including 
changing demands of the consumer, general inequality of wage 
scales, and the business cycle. The social conditions comprised 
such factors as lack of transportation facilities, inadequate means 
of communication, inadequate housing, and the absence of recre- 
ational facilities. In an analysis of labor turnover as a general 
economic and social problem approached chiefly from the point of 
view of the wage earner and of society, such a classification of causes 
would appear to be an appropriate one. 

In approaching the problem chiefly from the point of view of the 
employer, however, it seems best to relate the causes directly to each 
of the constituent factors voluntary quits, layoffs, and discharges. 
Such a classification will better serve management in discovering 
the conditions contributing to each item in separations, and so 
facilitate the right kind of readjustment in administrative and 
executive policies. The following classification, therefore, suggests 
itself: 

Resignations or voluntary quits: 

Unsatisfactory wages. 

Unfavorable physical conditions of employment. 

Dissatisfaction with the job. 

Dissatisfaction with the hours of work. 

Unfavorable labor policies. 

Desire to take advantage of more attractive positions elsewhere. 

Family reasons. 

Undesirable community conditions. 

Physical conditions, such as sickness, disability, old age, or death. 

Personal reasons. 

No verifiable explanation. 
Layoffs : 

General business conditions, such as market fluctuations, caused by 
recessions and depressions. 

Particular business conditions, such as lack of materials, orders, break- 
downs, technological changes, change in product, and reorganization. 
Discharges : 

Physical and economic incapacity and deficiency. 

Violation of shop rules and regulations. 

Dishonesty. 

Incompetency. 



LABOR TURNOVER 245 

Conditions Responsible for Voluntary Separations. Dissatis- 
faction with wages, conditions, and hours of employment is a 
prominent reason for termination of service. The day or piece rate 
often proves unsatisfactory, or the worker does not like the time 
and method of payment. Sometimes mistakes are made in the 
amount of wages due the worker and a proper adjustment is not 
forthcoming. What may be termed the " working environment" 
is not infrequently the cause of separations. The factory may be 
poorly lighted or the light may be badly distributed, the industry 
itself may be very dangerous, unhealthful and unsanitary conditions 
of employment may prevail, unpleasant odors may be present on 
account of the peculiar nature of the processes, and washroom and 
lavatory facilities may be inadequate or unkept. In many busi- 
nesses, the hours of labor are still excessively long, night shifts, and 
Sunday and holiday work are still common, shifts are inconvenient, 
the 7-day week may prevail, overtime may be excessive and rates 
too low, and considerable lost time may be incurred because of the 
nature of the industry. In certain types of employment, siich as 
that offered by domestic service, turnover rates are exceptionally 
high because of the effect of a combination of these factors. One 
investigation, for instance, has shown that out of every 100 workers, 
although rated " satisfactory " by the employer, 33 quit jobs and 
21 more were laid off within the first 6 months of employment. Of 
all placed, including both ratings, 34 per cent quit, and 27 per cent 
were laid off. 1 

The job itself is often the cause of termination. The worker 
may find it too hard, comprising the constant lifting of heavy 
materials or the manipulation of heavy machinery. The work may 
be excessively routine and fatiguing, involving undue strain upon 
the nerves, eyes, and attention. The job may be dangerous, noisy, 
dirty, oily, wet, or smoky. A great many workers find it disagree- 
able and unhealthful to work inside when extremes of temperature 
and humidity prevail, or outside where they are unprotected from 
inclement weather conditions. 

In a large number of cases, employees become dissatisfied with 
the personnel policies of the company. Autocratic methods of labor 
administration may prevail. The "old man" may be " hard- 
boiled," or the foreman may be arbitrarily and childishly partisan, 
displaying favoritism for particular individuals. Requests for 
transfers may be refused, and promotional opportunities may be 
very limited. Frequently, the company is too shortsighted to 

DRAFTS, M. E., ''Placement Follow-up of Women," Personnel Journal, 
vol. 11, February, 1933, p. 325. 



246 THE MAINTENANCE OF PERSONNEL 

provide for an annual vacation, and workers leave its service in 
order to enjoy a respite from exacting labor. In one shop, a 
personal investigation revealed a large number of employees who 
had not had a vacation in 10 to 20 years. The company had made 
no provision for annual vacations, and the workers were not 
financially able to " steal" one and seek employment elsewhere. 
Frequently, of course, labor troubles, strikes, and lockouts result 
in a large number of permanent separations. 

Of great importance among the reasons for employment termi- 
nations is the desire on the part of employees to avail themselves of 
more attractive opportunities elsewhere, where the rate of pay is 
higher, hours and conditions of employment are more satisfactory, a 
friendly attitude toward organized labor prevails, promotional 
opportunities are greater, or there is a chance to learn a trade. 
Sometimes workers leave to go into business for themselves. 

Family circumstances and community conditions are responsi- 
ble for a considerable number of resignations. The family may be 
moving because of inadequate or unsatisfactory housing; religious 
or educational facilities; excessive distance between the home and 
the factory and the absence of transportation facilities; sickness 
and the necessity of seeking more favorable climatic conditions; or 
the inability to cultivate acquaintanceships and friendships in a 
new community. 

Physical reasons account for a considerable number of termi- 
nations through resignation. Ill health, resulting from conditions 
of employment or from factors external to the place of work, often 
causes employees to leave the service of a company. Similarly, 
separations arise from injuries received in the course of employment 
or outside of work and from death. Married women whose eco- 
nomic circumstances force them to work in factories or mercantile 
establishments are often compelled to give up their employment 
because of pregnancy or sheer fatigue resulting from the double 
burden of factory labor and home duties. A study of labor turn- 
over in cotton mills disclosed the fact that physical conditions were 
responsible for about 71 per cent of all separations of women from 
the mills. 1 Finally, old age, with the accompanying desire to live 
the balance of life on the meager pension provided by the company 
or the state, terminates the employment relations of many old and 
faithful workers. 

1 "Lost Time and Labor Turnover in Cotton Mills," United States Women'* 
Bureau, Bulletin 53, 1926, p. 18. 



LABOR TURNOVER 247 

While practically all reasons for employment separations may 
be looked upon as personal, the term is used here in reference to a 
limited number of items such as wanderlust, a desire to continue or 
complete an educational course, removal from the city or the 
country, temperamental peculiarities, and marriage. Many workers 
are habitually migratory and restless, possessing an almost insatiable 
desire to roam. These persons make up the interesting but fre- 
quently pathetic group of individuals known in America as "casuals" 
and "hobos." They work for a few days, weeks, or months; then, 
either because the jobs they have are temporary or because the old 
spirit of wanderlust overpowers them, they journey on to some 
indefinite destination. Akin to this group are the large numbers of 
youthful workers whose natural instability, accounted for largely 
by the physiological changes incident to adolescence, figures so 
greatly in the statistics of labor turnover. Then there are those 
ambitious employees who have worked to save a sufficient surplus 
to enable them to complete a technical or cultural education, and 
who each autumn swell the ranks of those who leave industry and 
business establishments to return to high school or college. Each 
month of the year finds a goodly number of immigrants leaving 
industry for a more or less indefinite visit to the old country, and 
many individuals leaving one community for some other in the 
United States. Finally, especially among women employees, mar- 
riage is a responsible factor in terminations of employment. 

Large numbers of voluntary quits, of course, cannot be accounted 
for by any reason whatsoever, since new employees come into a 
plant, work for a few weeks, then leave without giving any reason 
for their termination of employment, and the management is unable 
to discover any cause. 

Some Reasons for Layoffs. The reasons for termination of 
employment through layoffs have already been suggested in the 
discussion of the relative responsibility of the constituent factors. 
It will be recalled that layoffs are extremely sensitive to the varying 
fortunes of industry and business, declining to a position of relative 
insignificance in years of normal or very active expansion, and 
rising to a level of considerable importance during the years or 
periods of business recession and industrial depression. In addition 
to these more extended periods of expansion and recession, many 
industries in every country are exposed to fluctuations traceable to 
the successive vicissitudes of business which occur more or less 
regularly over short periods within each year. These shorter 
periods of business variations are called "seasonal fluctuations" to 



248 THE MAINTENANCE OF PERSONNEL 

distinguish them from the longer periods, which are termed " cyclical 
fluctuations." 

The influence of both of these types of fluctuations, which are 
regarded by many as the most outstanding causes of labor turnover, 
may be clearly seen from a brief citation of facts. The relation of 
cyclical fluctuations to layoffs is evidenced by the fact that at least 
4,000,000 workers who were employed in September, 1907, were 
unemployed in January, 1908. Approximately 5,500,000 who were 
employed in the peak year of 1919 were thrown out of employment 
during the business slump of 1920-1922, and an estimated 12,000,- 
000, or more, employed in 1929 were out of employment by 1933. 
Seasonal variations have a marked influence on layoffs in such 
industries as coal mining, the building trades, the manufacture of 
clothing, canning and preserving, agriculture, lumbering, and auto- 
mobile manufacture. The estimated proportion of lost time in the 
clothing industry is 31 per cent; in shoe manufacturing, 25 per cent; 
in building trades, 37 per cent; in bituminous coal mining, 27 per 
cent; and in the automobile industry, 15 per cent; to mention only 
a few of the major industries which experience curtailed operations 
resulting from seasonal demands for their products. 

In addition to cyclical and seasonal fluctuations, other con- 
ditions, more or less peculiar to the particular establishment, 
contribute to the percentage column of terminations through lay- 
offs. Completion of temporary jobs; unexpected cancellation of 
contracts on the part of wholesale houses, jobbers, commission 
houses, and retailers; evolutionary changes in industrial technique, 
such as the introduction of laborsaving devices and machinery; a 
scarcity of raw materials or interruption in the transportation 
system which delays delivery; a serious breakdown in some 
important department of the plant which necessitates a shutdown 
for extended repairs; and strikes and lockouts; all contribute to 
separations from employment. 

Reasons for Dismissal. Each working day of the year sees a 
large number of employees leaving b.usiness and industrial concerns 
because of discharge. Close inspection of Fig. 19 will reveal the 
monthly discharge rate in American industry over the past 9 years. 
For real or imaginary reasons the services of such persons have 
been found unsatisfactory. Generally speaking, men and women 
are discharged either on account of incompetency or because of 
infraction of disciplinary rules and regulations. In a large number 
of cases, the worker is found incompetent and inefficient. He is 
too slow; possesses an indifferent attitude toward his work; is care- 



LABOR TURNOVER 249 

less in handling materials, tools, machinery, and other equipment; 
is irregular in his attendance or habitually late; is suspected of 
soldiering on the job; or his references have been found deficient. 
If he is not fired for incompetence, in all probability his departure 
is attributed to a breach of disciplinary rules. He has been sus- 
pected of dishonesty; his disposition is so disagreeable that neither 
the management nor his fellows can get along with him; he is a 
"chronic kicker/' " disturber," " troublemaker "; or has repeatedly 
manifested a spirit of insubordination. Sometimes, also, he is dis- 
charged because of intoxication, immorality, fighting, or excessive 
profanity and indecency. Occasionally he is discharged because 
of labor union activities, although more and more through legisla- 
tive measures he is being protected from discrimination by his 
employer on this account. 

Incidence of Labor Turnover. If there is to be an intelligent 
formulation of plans and methods of reducing labor turnover and 
the construction of anything approaching a solution in particular 
cases where the problem is especially acute, an analysis must be 
made of the distribution of labor turnover according to such 
factors as occupation or degree of skill, sex, age, nationality, length 
of service, and education. Only in this way can management 
determine the incidence or the final resting place of the burden of 
labor turnover and the principal responsible factors. 

1. The Relation of Occupation and Skill to Labor Turnover. It 
is almost impossible to make any general quantitative determi- 
nation of the relative stability of skilled, semiskilled, and unskilled 
occupations, because there still obtains no standardized classification 
of occupations on the basis of skill. Occupations and operations 
that in one industry are classified as skilled are in other industries 
designated as semiskilled, and those which in some industries are 
designated as semiskilled are in others classified as unskilled. 
Amidst so much confusion of terminology there is little hope that 
we shall soon be able to establish as close a correlation as should be 
established between the degree of skill and the rate of labor turnover. 

Traditional usage divides occupations into five groups, namely, 
clerical, minor executive, skilled, semiskilled, and unskilled. Since 
the percentage of labor turnover in the minor executive and clerical 
groups appears in so many cases to be relatively insignificant, our 
chief concern must be with the other three groups. The findings of 
numerous reliable investigations show that the labor-turnover fre- 
quency rate among, skilled workers is much lower than the rate for 
semiskilled or unskilled workers. In proportion to the ratio it 



250 THE MAINTENANCE OF PERSONNEL 

bears to the total payroll, unskilled labor almost always shows the 
highest percentage of labor turnover. The following conclusion, 
based upon one of the most thorough studies of labor turnover 
made thus far in the United States is indicative of this fact: "The 
high turnover of the unskilled occupations is of especial importance. 
Here are found from one-fourth to one-fifth of the pay roll, con- 
tributing more than one-half of all plant separations in two of the 
years (1923, 1924) and 43 per cent in 1922, the year with tho most 
favorable showing." 1 Moreover, careful examination of numerous 
statistical studies of labor turnover leads to the conclusion that 
unskilled labor shows the highest degree of instability, whether 
expressed in terms of voluntary quits, layoffs, or discharges, 
followed in turn by semiskilled and skilled labor. The percentage 
of turnover is greatest among skilled workers during the year 
immediately following the period of apprenticeship, largely because 
at such a time journeymen desire to gain the wider experience and 
improved knowledge and skill which invariably result from employ- 
ment in different shops and industries. 2 

It is pertinent to ask why this difference is present in the rela- 
tive stability of skilled, semiskilled, and unskilled labor. Several 
conditions account for the discrepancy. In the first place, skilled 
workers have a greater measure of adaptability. Being familiar 
with the basic technique of their industry and having considerable 
knowledge of the major processing from the raw material to the 
finished article and an understanding of the principal tools, machin- 
ery, and equipment, they can adjust themselves easily to new need 
and situations. Skilled labor is relatively scarce and is expensive to 
develop; therefore, the employer is less hasty in discharging skilled 
workers in periods of normal industrial activity and retains them as 
long as practicable after business recession has sot in. Skilled labor 
is much better paid than unskilled and normally has much less 
cause for dissatisfaction with conditions of employment. More- 
over, skilled workers tend to be more conservative, voicing little or 
no protest against the status quo in industry or the existing economic 
order. They have a more intelligent understanding of inevitable 
financial losses which normally accrue from frequent migration and 

1 Industrial Research Department, Wharton School of Finance and Com- 
merce, "Four Years of Labor Mobility; a Study of Labor Turnover in a Group 
of Selected Plants in Philadelphia, 19211924," Annals of the American Academy 
of Political and Social Science , Supplement, vol. 119, May, 1925, p. 76. 

2 For a discussion of this point see ibid., pp. 70-72. Also see reports on 
"Labor Turnover of Certain Industries," Monthly Labor Review, vol. 44, 
February, 1937, p. 431. 



LABOR TURNOVER 251 

ihange of jobs. Finally, unskilled workers are, for the most part, 
inorganized, whereas skilled workers, because of their relative 
icarcity and greater intelligence, have been able to effect a high 
legree of unionization and efficient methods of collective bargain- 
ng. This fact makes it possible for them to obtain what they want 
n the way of hours, wages, and conditions of employment without 
eaving their customary jobs. 

2. Sex in Relation to Labor Turnover. The special investigations 
>f labor turnover thus far completed in the United States do not 
varrant any generalization concerning the relative industrial sta- 
)ility of men and women. The experiences of business and indus- 
,rial establishments present conflicting evidence. In some cases, 
vomen workers manifest a greater degree of stability than men 
assessing the same degree of skill and length-of -service records. 
This difference is explained on the ground that women are less 
ndependcnt industrially than men because of a conspicuous lack 
>f unionization and because of social custom which frowns upon the 
nigratory woman worker. The extended experience of some firms 
suggests that the percentage of turnover among female employees 
s invariably higher and the fluctuations more extreme than in the 
^ase of male workers. There is considerable agreement among 
special students of the subject that "In the long-time-service groups 
)f separated employees, the figures for males show that they are 
ess prone to sever connections with an establishment after having 
vorked in it a considerable period of time." 1 This observation has 
)een borne out more recently many times, as is suggested by tho 
iata in Table 6 showing the length of service of male and female 
tobacco employees throughout twenty-seven plants in the east. 
Here, almost 11 per cent of the Negro males had at least 20 years of 
service to their record, as compared with less than 2 per cent of the 
STegro females. Lack of skill and experience, relative physical 
ncapacity, marriage, and a peculiarly important relationship to 
:he home and race doubtless tend to accentuate whatever difference 
}here may be in the comparative turnover rates for men and 
women, such factors conducing to a relatively high rate for the 
latter. When a sufficiently comprehensive study of this phase of 
the problem is completed to warrant a general conclusion, it will, 
in all probability, prove that taking them by and largo under the 
same qualifying conditions male and female employees manifest a 
similar degree of instability, with women manifesting a slightly 
higher rate in proportion to the numbers in industry. Particular 

1 BRISSENDEN and FBANKEL, op. tit., pp. 123, 124. 



252 THE MAINTENANCE OF PERSONNEL 

studies already made indicate such a result. An investigation of 
labor turnover in the cotton mills of the North and the South 
revealed the fact that the combined turnover rate for men and 
women in all mills was 142.3 per cent, the rate for women was 
142.5 per cent, and the rate for men 142.1 per cent. Wpmen 
constituted 41.2 per cent of the workers in all mills. 1 

3. Age and Education as Factors in Labor Turnover. There is 
conclusive evidence that the rate of turnover among children is 
exceptionally high, and that, within certain limits to be described 
later, labor stability tends to accompany advancing age and 
maturity. Youthful workers are restless and show an especial 
tendency to change jobs during the early years of industrial employ- 
ment. An extended study showed that one- third of the child 
workers leave their first positions within 3 months and over one- 
half within the first 9 months. 2 The psychological nature of 
youthful workers, combined with their impatien t desire for economic 
advancement, probably accounts for this remarkable situation. 

As already indicated, skilled workers move about considerably 
during the years immediately following completion of apprentice- 
ship, in order to increase their skill and experience. As they grow 
older, adult workers, both skilled and unskilled, tend to settle down 
and figure less in turnover rates until they reach an age when, 
because of a decline in physical vigor and a consequent lessening of 
efficiency, some industries cease to welcome them or lay them off in 
favor of younger blood. Labor instability decreases as the higher 
age groups are reached. Those above thirty-five manifest much 
greater stability than those under that age, the percentage being 
negligible among the relatively permanent group of employees who 
are fifty years of age or above. 3 

Little is known of the relation of education to the stability of 
the working force, and the meager evidence available is incon- 
clusive. In Chap. XII, it has been suggested that there is some 
correlation between education and the rate of turnover. The per- 
centage of mobility probably is in direct ratio to educational attain- 
ment, greater adaptability resulting from an increasing quantity 
and better quality of education. It has been found that, in pro- 
portion to their percentage of the total payroll, high school students 

1 United States Women's Bureau, op. tit., pp. 15, 17. 

2 See WOODBURY, R. M., "Industrial Instability of Child Workers," United 
States Children's Bureau, Bulletin 74, p. 108. 

8 For a fuller discussion of this subject, see Industrial Research Department, 
Wharton School of Finance and Commerce, op. tit., Chap. X. 



LABOR TURNOVER 



253 



evidence a remarkably high degree of mobility. Generalizations 
on this point, however, are unwarranted. 

4. Nationality as a Factor. The limited studies that have been 
made of the relative importance of nationality as a factor in labor 
turnover seem to suggest that certain nationalities are probably 
more responsible than others for a high rate of instability, but here 
again caution must be exercised in interpreting statistical data. 
"One can say without hesitation that certain nationalities are 
regularly and continuously causing a higher turnover than others, 
but one cannot, without analysis of occupational rank, attribute this 
to national aptitudes/ 71 Italians and Russians and other nation- 
alities from the south and the east of Europe appear to have a much 
higher degree of industrial instability than Americans, Canadians, 
and northern and western Europeans, but one is hardly justified in 
concluding that this difference is due to racial or national traits. 
Rather is such information indicative of the generally known fact 
that eastern and southern Europeans have considerable monopoly 
of unskilled occupations in many industries and that such occu- 
pations are characterized by a relatively high degree of labor turn- 
over. Such data, moreover, may also suggest that the "new 
immigrants/ ' as they are commonly called, are employed under very 

TABLE 6. LENGTH OF SERVICE OP 6,606 WAGE EARNERS IN THE AMERICAN 
CIGARETTE INDUSTRY BY SEX AND COLOR, MARCH, 1935 1 







Average length of 


Per cent of employees with service of 






service, years 






Num- 
ber of 




























Snuff 














Sex and color 


em- 
ploy- 


East- 




and 

smok- 


Less 


1 and 


5 and 


10 and 


1 5 and 


20 




ees 
report- 
ing 


ern 
code 
indus- 


Ciga- 
rette 


ing 
and 


than 
1 


under 
5 


under 
10 


under 
15 


under 
20 


years 
and 






try 




chew- 


year 


years 


years 


years 


years 


over 


. 








ing to- 






















bacco 














Males, White 


1,539 


6.0 


6.0 


6.0 


8.4 


48.5 


25.3 


9.9 


3.9 


4.0 


Females, White.... 


2,266 


4.9 


5.2 


3.7 


13.5 


53.8 


20.4 


8.0 


2.2 


2.1 


Males, Negro 


1,135 


8.0 


5.6 


12.6 


5.4 


45.2 


23.7 


10.5 


4.3 


10.0 


Females, Negro. . . . 


1,666 


5.7 


6.6 


4.3 


4.6 


37.4 


45.2 


9.2 


2.2 


1.4 



SotracK: Monthly Labor Review, February, 1937, p. 325. 

1 Data cover a portion of the wage earners in 27 plants. Six plants and 306 wage earners 
were found in the North, and 21 plants and 6,300 employees in the South. There were 4,753 
wage earners in the cigarette and 1,853 in the snuff, smoking, and chewing tobacco branch of 
the industry. 

* Ibid, p. 112. 



254 THE MAINTENANCE OF PERSONNEL 

unfavorable conditions of employment; they work for long hours at 
low rates of wages and under autocratic methods of supervision. 
Such conditons inevitably tend to stimulate instability. The rela- 
tionship between nationality and turnover in the cigarette industry 
mainly in the South is shown by the data presented above. In 
this industry, Negro males have a lower turnover rate and, conse- 
quently, a record of longer service than do male whites. Partial 
explanation of this situation is found in the adaptability of the 
Negro male to this occupation. 

5. Length of Service in Relation to Labor Turnover. Length of 
service is an extremely important factor in the efficiency of the 
average industrial working force. It is much easier to develop and 
maintain efficiency and loyalty among groups of workers who, 
through many years of association, are intimately known to one 
another and are familiar with the policies, traditions, and purposes 
of the company, than it is among groups of employees whose ranks 
are constantly being thinned of old employees and recruited from 
new ones. Whenever old employees must be replaced or additions 
made because of expansion, it is important that the recruits, if 
carefully selected on the basis of desirable qualifications, shall be 
kept as a part of the working force. The cost of hiring and break- 
ing in new men makes such a policy necessary. Length of service, 
of course, will depend upon many conditions peculiar to the industry 
and the establishment, such as the nature of the operations, general 
employment conditions, the ratio of skilled to unskilled positions, 
the ratio of male to female employees, and the administrative 
policies of the various departments. Length-of -service records do 
not, for example, show up so favorably in a seasonal industry, like 
the manufacture of clothing, as in an industry relatively undis- 
turbed by these variations, such as street railway service. 

The data presented above show that for the companies covered 
in this study, approximately half of the male Negro workers had a 
length-of-service record of 5 years or more and slightly more than 
one-fourth had at least 10 years of service. The service record for 
the male group was considerably higher in the snuff and chewing 
tobacco plants (12.6 years) than it was in the cigarette plants 
(5.6 years), whereas, with the male whites the average length of 
service in these two branches of the industry was the same (6.10 
years). Again, the highest average length-of -service group in the 
cigarette plants was that of Negro women, largely hand stemmers, 
with an average of 6.6 years, and the lowest service group in both 
branches was that of white women. These differences are doubt- 



LABOR TURNOVER 255 

less due in part to the rough and unpleasant character of the work 
in many of the plants. 

When the percentage of employees leaving the service of a 
company within the first few months is great, there is need for a 
critical examination of employment policies, production planning 
and control, and methods of recruitment, selection, training, and 
placement; not to mention rates of pay, the schedule of hours, 
and physical conditions of employment. The experience of various 
industries and different establishments in the same industry and 
business is naturally not uniform with regard to length-of -service 
records. But it is a significant fact, revealed in special investiga- 
tions of the subject, that the majority of separations occur within 
the first year of service, principally within the first three months. 
In one investigation the conclusion was reached that workers 
"leave voluntarily and are laid off or discharged at least one 
hundred times as rapidly from the under-three-months group as 
they arc from the three-to-five-years group." 1 

Another investigation, covering a group of selected plants in 
Philadelphia, uncovers similar facts. In the year 1922, a period of 
business depression, 64 per cent of all separations were found to 
have been less than 3 months at any one plant and 85 por cent less 
than 1 year; whereas, in 1923, a year of business recovery and 
prosperity, a trifle over 86 per cent were in the less than 1 year 
group and 63 per cent in the less than 3 months group, there being 
little difference between the 2 years for these intervals. 2 It would 
seem, therefore, that short service, that is, service of less than 1 
year, is an important factor in labor mobility, and the percentage 
of labor turnover is greatest among those short-time groups of 
workers. This at least indicates a possible deficiency in industrial 
administration and suggests a focal point of attention. 

6. Mentality and Labor Turnover. Recent studies have dis- 
closed tjie fact that under certain conditions there may be a very 
definite relationship between the employees 7 mentality and the rate 
of labor turnover. One writer, for instance, reports the following 
results of a special study of this relationship: 3 

In two different companies . . . experiments were made to trace this 
relationship. In both companies the mental alertness of the employees 
was determined by test and was found to have a very direct relation to 

1 BRISSENDEN and FRANKEL, op. ciL, p. 141. 

2 Industrial Research Department, Wharton School of Commerce and 
Finance, op. cit., p. 51. 

3 SCOTT, CLOTHIER, and MATHEWSON, op. cit., p. 462. 



256 THE MAINTENANCE OF PERSONNEL 

stability. In these two companies, however, the relationship was quite 
different. . . . The curve [mental alertness] for Company A shows that 
about 40 per cent of the clerks hired who have a mental alertness test score 
between 15 and 30 leave within six months. This percentage decreases 
rapidly with the higher test scores until greatest stability is found among 
clerks scoring between 35 and 50. For clerks scoring more than 50 the 
percentage of persons leaving rises again rapidly until, for those making 
the highest scores, the instability is even greater than for those making 
the lower scores. This was a serious matter for Company A, since it had 
already been demonstrated in this company that high score employees are 
of the greatest value as workers. . . . 

The curve [mental alertness] for Company D shows a very different 
situation. As in Company A the turnover rate among the employees 
making low mental alertness scores was high. The percentage, however, 
dropped sharply as far as the score of 30 when there was an obvious rise 
in labor turnover which was maintained over 15 points of the mental alert- 
ness scale. Then as the highest scores were reached, those exceeding 50, 
there was a pronounced increase in stability, a condition quite contrary 
to that of Company A. This curve of the labor turnover in Company D, 
in relation to mental alertness, revealed a peculiar wage situation which was 
causing instability among the middle-high employees. This influence has 
now been corrected. 

Such results as these are easily explained. In the process of 
placing employees, often individuals are assigned to tasks which 
they are not mentally equipped to perform. If their mentality 
exceeds the level of that required by tbeir new jobs, they soon 
become impatient, and both ambition and desire cause them to 
seek another type of work. If it is less than the level of that 
required by their jobs, they may struggle along for a while, but, if 
they are mentally deficient, they sooner or later either become dis- 
couraged and quit or are dropped by the management. 

7. General Environmental Influences and the Rate of Labor Turn- 
over. One other factor is significant enough in its relation to labor 
turnover to justify separate mention. Every employer knows the 
importance of the stability characteristics of the general community 
from which his labor supply is recruited and maintained. Both 
the size and location of the community are influencing factors. 
Persons living in old and well-established cities and towns of the 
East, surrounded by generations of friends and relatives, are less 
likely to shift from one organization to another or from one com- 
munity to another, than are those who have moved into the newer 
communities of tbe West. 



LABOR TURNOVER 257 

Methods of Reducing Labor Turnover. Since the remainder of 
this study consists principally of an analysis and description of 
methods of improving labor relations, it is unnecessary here to go 
into detail concerning the ways and means of reducing labor turn- 
over. An outline of such methods, however, is desirable. First 
of all, it should be stated that the experience of American industries 
yields encouraging proof that labor turnover can be reduced when 
intelligent principles and methods of procedures are applied. The 
Ford Motor Company reduced its turnover rate from 416 per cent 
to less than 80 per cent in a single year; the Dennison Manufacturing 
Company cut its annual turnover rate from 68 per cent to 37 per 
cent; and many other concerns have been able to reduce the total to 
one-third or even one-tenth the former amount. Stabilizing the 
personnel of industrial organizations is more easily written and 
talked about than done, and yet there is every reason to believe that 
what these companies have succeeded in doing lies within the reach 
of all those enterprises that are willing and able to apply the same 
basic principles and methods of procedure. These may be sum- 
marized as follows : 

1. Adequate Statistical Control. This will involve a carefully 
worked out system of records for the keeping of necessary data and 
will make possible the recording of complete information concerning 
the distribution of separations by shops, departments, occupations, 
sex, age, race, nationality, length of service, and education. Such 
control will involve also a critical analysis and clear presentation of 
statistical evidence, so that the constituent phases of the problem 
may be manifest to the management and adequate funds be appor- 
tioned for its solution. 

2. Scientific System of Recruitment, Selection, Placement, and 
Follow-up. As stated in detail in the chapters on these subjects, 
such a system will strike at the roots of labor instability by bringing 
to -the plant employees who will be likely to stay, requiring a 
physical and mental test of all new employees, placing the right 
man in the right job, and assuring proper adaptation and progress 
by introduction and follow-up. 

3. Job Analysis and Specifications. Job analysis and job speci- 
fications will make possible the intelligent application of scientific 
principles and methods of selection and placement. Men and 
women in industry will thus be assigned positions for which they 
are physically, mentally, and technically qualified. As a conse- 
quence, a considerable portion of dissatisfaction with jobs will 



258 THE MAINTENANCE OF PERSONNEL 

disappear, a condition which will react favorably upon the rate of 
turnover. 

4. Enlightened Labor Supervision. This involves the application 
of intelligent principles and methods of labor maintenance, including 
desirable standards of wages, hours, and conditions of employment, 
a definite system of transfers and promotions, a program of health 
and safety, a rational code of shop rules, facilities for education and 
training, opportunities for recreation and amusement, a system of 
nonfmaiicial incentives, effective agencies for publicity, and a 
program for the improvement of the industrial community. 

5. Joint Control. There should be definite means of communi- 
cation between management and men for the hearing of grievances 
and complaints and the consideration of suggestions for improve- 
ment in the technique and administration of the enterprise. These; 
will include a plan of joint control through committees representing 
management arid the workers, whose functions will be sufficiently 
general to cover the review of shop regulations, grievances, and 
discharges, and to encourage mutual understanding and general 
cooperation. 



CHAPTER XIV 

ABSENTEEISM AND TARDINESS 

Absenteeism. Absenteeism refers to the worker's absence from 
his regular task, no matter what the cause. Tardiness is a tempo- 
rary form of absenteeism, having reference to the worker's lack of 
punctuality in arriving at his place of work. Like labor turnover, 
both absenteeism and tardiness arc in part a manifestation of that 
spirit of irresponsibility and indifference which has prevailed so 
generally where modern industrialism, with its loss of ownership 
and control for the wage earner, has been developed. The wage 
relationship, centering about a purely cash nexus, is characterized 
by uncertainty, instability, and lack of interest and devotion to 
the job. In the performance of employment duties, workers are 
impelled by a motive of fear and necessitous economic circum- 
stances, rather than by a real, sincere, and creative interest either 
in the job or in the company. As long as this state of mind obtains, 
the problem of bad timekeeping will continue to be a serious one, 
becoming acute in periods of emergency and labor scarcity when 
the workers enjoy a measure of real economic independence. 

Absenteeism is frequently a precursor of labor turnover. Many 
workers absent themselves from their regular jobs to search for 
more attractive ones. Excessive absenteeism invariably results in 
discharge from the service of the company. Absenteeism, or lost 
time, as it is termed in Great Britain, refers to absence from work 
for whole days or half days. When the absence is for less than a 
half day it is usually classified as tardiness. While tardiness does 
not slow up production so much as do absences, it is detrimental 
to the morale of the working force and is often responsible for idle 
machine time and lessened efficiency on the part of the operative 
himself and all those whose work is related to his. For this reason 
absenteeism and tardiness are considered together, although the 
treatment of them may not always be identical. 

The real problem of absenteeism is how to handle it, especially 
in cases of workmen who feel that they are entitled to take a day 
or so off whenever they are inclined. Not all absenteeism is 
undesirable, any more "than is all labor turnover. In industries 

259 



260 THE MAINTENANCE OF PERSONNEL 

where the work is excessively fatiguing, periodical absence from 
the job constitutes a sort of defense mechanism for the tired work- 
man and tends to prevent an abnormal accumulation of fatigue 
poisons and a resultant breakdown in health. It is imperative that 
immediate attention be given to conditions of employment that are 
compelling absenteeism on the part of willing, industrious, and 
thrifty workmen. The chronically absent or tardy worker, who is 
not overfond of work or who cannot stand too much prosperity, 
constitutes an even more serious problem for the employer. 

Extent and Measurement of Absenteeism. The method of 
measuring absenteeism is simple, involving merely the division of 
the total number of hours of lost time by the number of hours that 
could have been worked on a full schedule by each workman. The 
formula used is 

L 



in which A represents the percentage of absenteeism, L the number 
of days of lost time, and F the total number of possible working 
days. Thus, if a given workman could have labored 300 days 
last year but actually worked only 280, his percentage of lost time 
was 2 %oo, or 6.7 per cent. 

Many studies of absenteeism have been made, but adequate 
statistics are still lacking which would show the importance of this 
problem for whole industries. These data, although usually for 
individual companies, are none the less instructive. The best 
records come from England, where reports on over 14,000,000 gain- 
fully employed persons included in the Compulsory Health Insur- 
ance System show that in 1934 an average of 14 days per person 
was lost from work. 1 A comprehensive study recently made 
covering the United States showed that the gainfully employed 
worker in this country is sick in bed on the average of 2.2 days per 
year. 2 These figures do not include the many interruptions other 
than those resulting from bedridden illness which keep the employee 
from his place of work for additional days during the average year. 

1 "Psychological Factors in Sickness Absenteeism," Safety Engineering, 
vol. 72, September, 1936, p. 124. 

2 FALK, I. S., MARGARET C. KLEM, and NATHAN SANAI, "The Incidence of 
Illness and the Receipt and Costs of Medical Care Among Representative 
Families, Committee on the Cost of Medical Care/ 7 Publication No, 26, 1932, 
p. 81, 



ABSENTEEISM AND TARDINESS 261 

The extent of absenteeism is further illustrated by special refer- 
ence to specific concerns. A steel company employing 9,733 men 
discovered that it was losing a total of 259,690 man-days per year 
through absences of its employees. This was an average of one 
day out daring every 13 working days, 23 days per year of 300 days, 
or a total for the company equivalent to a whole year's service of 
300 days for 965 men, and a wage loss of 8 per cent of the total 
annual payroll. 1 A textile plant employing 442 workers discovered 
that during 1 year of 222)^ operating days its employees had lost 
on the average 1 day in every 19, or 16 days per worker during the 
year in wages, some 5 per cent of the company's total payroll for 
the year. 2 A study of four different cotton mills showed that 
time lost from work varied from 3.1 per cent in one mill to 16.8 
per cent in another. 3 In three of the mills, the average number of 
days lost for men ranged from 6.5 to 33.5; for women, from 11.9 
to 69. In a recent study made in California, it is estimated that 
the average worker loses from illness absence alone approximately 
3 per cent of the working year. 4 Although inadequate, this evi- 
dence supports the conclusion that absenteeism and tardiness cause 
lost time in American industry of some 7 per cent or more per year. 
Obviously, any effective measure initiated to reduce absenteeism 
will pay substantial dividends to all parties concerned. 

The Causative Factors. Experience of American industry indi- 
cates that the causes of absenteeism are gradually becoming, 
through proper record procedure, less difficult to determine. With- 
out attempting a rigid categorical classification, experience suggests 
the following causative factors: 

1. Conditions existing in the indiistry. 

2. Conditions external to the industry. 

3. Conditions developing in the personal life and experience of the workers. 

1. Causes Existing in the Industry or the Plant. These are 
numerous. Among the major ones are fatigue, occupational sick- 
ness, and industrial accidents; insufficient wage incentives; faulty 
selection and placement of employees; and insufficiency or irregu- 
larity of supply of raw materials, machinery, and equipment. 

1 GOULD, ERNEST C., "Meeting the Absentee Problem," Textile World, 
vol. 69, no. 2, Jan. 9, 1926, p. 13. 

2 Ibid., p. 5. 

3 United States Women's Bureau, Causes of Absence for Men and for Women 
in 4 Cotton Mitts, vol. 69, 1929, pp. 1-22. 

4 Unpublished estimates made by the California Medical Economic Survey, 
1937, 



262 THE MAINTENANCE OF PERSONNEL 

Other causative factors include the poor scheduling and routing of 
work; temporary or sporadic breakdowns; undesirable conditions 
of employment, such as inadequate lighting, heating, and ventilating 
facilities; excessively long hours of labor, including a long regular 
shift and frequent overtime and Sunday work ; excessive monotony, 
noise, vibration, and disagreeable tasks; insufficient rest periods 
and holidays ; and friction with the foremen. In seasonal industries 
having high production schedules at intermittent intervals and in 
all periods of abnormal industrial activity, it is often necessary to 
employ persons physically, mentally, morally, and technically 
unqualified to do the work required of them. Many such persons 
are unused to the discipline of industrial life and are incapable of 
regular employment. 

2. Causes External to the Industry. These comprise such factors 
as inadequate housing accommodations near the establishment, 
which force the worker to live some distance from his work. This 
conduces to tardiness and compels the worker to rise early in order 
to "make the gate on time." Closely associated with this condition 
is the absence of sufficient transportation facilities, such as uncertain 
and irregular streetcar service or a breakdown of the automobile. 
A general tie-up or interruption of transportation by a strike on 
the railroads or on steamship lines may delay delivery of raw 
materials, thus causing lost time. Congested housing conditions 
contribute to sickness and so enhance the percentage of absenteeism. 
Lack of recreational opportunities in the community encourages 
workers to lay off and go to distant cities for an outing. The 
prevailing condition of the labor market has a direct influence on 
absenteeism. When jobs are abundant, workers are prone to lay 
off and go in search of better opportunities in other plants. During 
such times, rules governing attendance are not likely to be rigidly 
enforced. Climatic conditions constitute a significant factor. 
Excessive cold or heat, humidity', snow, and rain conduce to absen- 
teeism, especially in those occupations in which much of the work 
is done out of doors, as in the building trades and in railroad yards. 
The time of the year and the day of the week enter into the causation 
of absenteeism. Saturdays and Mondays and all days immediately 
following holidays figure largely in the statistics of lost time. 

3. Causes Arising in the Lives and Experiences of the Workers. 
These also are numerous. In many instances, as in cases of illness 
and accident, they are related to the first set of conditions, or 
those which develop in the office or plant. The household duties of 
married women frequently contribute to absenteeism among female 



ABSENTEEISM AND TARDINESS 263 

workers. Sex is a factor also, the percentage of lost time being 
higher among women than among men employees. Indifference, 
laziness, discontent, and excessive consumption of akoholic liquors 
account for a considerable portion of absenteeism, as does also a 
love for pleasure and recreation. The worker's standard of living 
affects his faithfulness to his job. If his income is in excess of the 
requirements of his standard of life and he is not thrifty, he is 
inclined to prefer the leisure of a frequent holiday to the satisfaction 
of additional wants which he has not definitely arid habitually 
acquired. The absentee rate among Southern Negroes appears to 
be high because their wants are few and easily satisfied. The 
higher standard of living of white American workmen encourages 
more faithful attendance at work. Lateness often becomes 
habitual, and some executives claim that the major percentage of 
lateness is the result of habit. 

Sickness and accidents have generally been found to be the 
major causes of absenteeism. In two English factories where time- 
keeping records were especially complete, it was found that in one 
sickness was responsible for 46 per cent of all absences and in the 
other this factor accounted for 54 per cent of the total. 1 A careful 
study by the United States Public Health Service led to the con- 
clusion that the average American workman loses 9 days annually 
from work because of illness. 2 An investigation of South Carolina 
cotton-mill towns showed that illness was the causative factor in 
32.2 per cent of the total number of days lost. 3 The United States 
Steel Corporation found that over a period of six years, with 300 
days counted to the average year, in a plant employing 6,600 men, 
the amount of days lost per worker was 6.2 per cent in steel works 
where the accident rate was high, and 2.4 per cent in the yards 
where the accident rate was relatively low. 4 The Philadelphia Gas 
Works Company found that out of 2,500 employees, 1,810 cases of 

1 LovEDAY, THOMAS, "The Causes and Conditions of Lost Time," Report of 
the Health of Munitions Workers, no. 7, Committee on Industrial Fatigue and 
Efficiency, 1917, Cd. 8511, p. 48. 

2 United States Public Health Service, "National Health Survey, 1935- 
1936," Monthly Labor Review, vol. 46, March, 1938, p. 668. 

8 SYDENSTRICKER, EDGAR, B. S. WARREN, and JOSEPH GOLDBERGER, 
"Disabling Sickness Among the Population of Seven Cotton Mill Villages of 
South Carolina in Relation to Family Income," United States Public Health 
Service, Reprint, Bulletin 492, p. 11. 

4 KEIR, J. S., "The Reduction of Absences and Lateness in Industry," 
Annals of the American Academy of Political and Social Science, vol. 71, May, 
1917, p. 143. 



264 THE MAINTENANCE OF PERSONNEL 

illness were the cause of absences over a 6-month period, and that 
eight times as many days were lost because of illness as because 
of accident. 1 In a textile mill, 43.4 per cent of all absences were 
found to be due to illnesses, 4.3 per cent to accidental injuries, 7.8 
per cent to domestic duties, and the remaining 44.5 per cent to 
miscellaneous conditions, such as weather, family moving, personal 
business, drunkenness, oversleeping, rest, company at home, sick- 
ness at home, and the like. 2 

A special committee investigating absenteeism due to illness 
and accident during 1935 in 31 cement mills of the Portland Cement 
Association discovered that the average loss for each person ill was 
6.41 days during the year. Respiratory diseases caused 55 per cent 
of illnesses and 38 per cent of the time lost. Abdominal and 
digestive illnesses caused 19 per cent of all absenteeism and 22 per 
cent of total time lost. Miscellaneous illnesses, most important of 
which were rheumatism and arthritis, accounted for 25 per cent 
of illness absenteeism and 40 per cent of lost time. Occupational 
injuries caused about one-half as many absences as noiioccupational 
injuries but were more severe. For every 100 absences due to 
illness, three absences from occupational injury occurred, and for 
every 100 days lost due to illness, 22 days were lost because of 
occupational injury. The average loss to each person ill was $19.86 ; 
to each person injured outside the plant, $29.85; and to each person 
injured at work, $167.23. The committee reported that in the 
Portland cement industry, as in other industries, the most signifi- 
cant illnesses from the viewpoint of lost time and frequency of 
absence are the less severe and, therefore, the preventable types. 3 
While these data refer to an occupation recognized as hazardous, 
they show how important a cause of absenteeism accident and 
illness can become in certain types of industries. 

Distribution of Absentee Frequency. From the investigations 
that have been made in certain plants in the United States, inter- 
esting information, although not in every particular convincing, 
has been gathered with regard to the distribution of absenteeism 
according to marital status, age, nationality, sex, climatic, and 
occupational factors. These data are of some importance in the 
control of the problem, and the conclusions drawn from them should 

1 INMAN, R. B., "Illness vs. Accidents," National Safety News, vol. 22, 
December, 1930, p. 52. 

2 GOULD, op. tit., p. 13. 

3 CUKLES, A. J. R., "Absenteeism in the Cement Industry," Rock Products, 
vol. 39, December, 1936, pp. 65-67. 



ABSENTEEISM AND TARDINESS 265 

be given consideration by every manager of industrial relations. 
Certain commonly held impressions receive a severe jolt in some of 
the evidence collected. For example, one company found that 
single employees lost much less time than married persons, and single 
males less than single females. In another instance, a new England 
rubber company kept a record of absences due to disability lasting 
2 days or longer (1927-1928). The frequency of sickness causing 
absence was 31 per cent higher among married than among single 
women, and the duration of illness among the former was also con- 
siderably greater. 1 Yet, it is commonly believed that single persons 
lose more time than married persons. Statistics show that both 
married males and females have a smaller labor turnover than 
single persons, but this stability is offset by a higher rate of absen- 
teeism among them. 2 ^ 

Sex, like marital relationship, is a responsible factor. The 
Edison Electric Illuminating Company reports that female employ- 
ees tend to be absent on account of illness much more than males 
and lose twice as many days through sickness as are lost by males, 3 
The Dennison Manufacturing Company found in its factory depart- 
ments an absentee record of 5.2 per cent among the women, as 
against 3.5 per cent among the men, and, in the clerical sales 
division, women showed a percentage of 2.6 per cent, as against 1.1 
per cent for men. In some departments there was no difference. 
Physical limitations and the responsibilities of home life account for 
the disparity between men and women in the matter of absenteeism. 4 

The age factor would naturally enter into percentages of tardi- 
ness and absenteeism. Experience indicates that youthful employ- 
ees are more careless in the matter of punctuality and attendance 
than are more mature workers. The Philadelphia Gas Company 
reports that the ages from forty-one to fifty and from twenty-one 
to thirty are ages most affected by severity of illness. A farm- 
implement manufacturing company recorded disabilities from sick- 
ness lasting 8 or more days (including those due to industrial 
accidents) and found the number of days lost per man per year rose 
faster with age than did the frequency of illness, owing to the longer 

1 BRUNDAGE, DEAN K., "Incidence of Illness among Wage Earning Adults," 
Journal of Industrial Hygiene, vol. 12, November, 1930, pp. 338-358, and 
December, 1930, pp. 381-400. 

2 QuiNBY, R. S., "A Study of Industrial Absenteeism," Monthly Labor 
Review, vol. 13, no. 4, October, 1921, p. 4. 

3 BRUNDAGE, op. tit., p. 349. 

4 KEIR, op. cit., pp. 144, 145. 



266 THE MAINTENANCE OF PERSONNEL 

durations of disability in the higher age groups. 1 In general, the 
time lost by male workers below the age of forty on account of 
illness tends to be lower than the average male disability, but 
beyond forty, males show a rapidly increasing morbidity rate. In 
the case of female employees the rate remains less than the average 
up to age thirty, but increases beyond that point. 2 

There is considerable uncertainty as to the correlation between 
nationality and absenteeism. Some companies have found that 
American-born workers tend to lose less time from sickness and 
accident than most other nationalities. There is no ground for a 
positive conclusion in this particular, however, and a greater amount 
of evidence will be necessary before such a conclusion can be arrived 
at definitely. 

For both men and women, the percentage of absenteeism is 
evidently higher on Monday than on other days of the week, 
decreasing gradually until Saturday when it rises again slightly. 
It has been found that the rate of absenteeism rises rapidly on 
dark, inclement winter mornings and is generally high in bad 
weather at all seasons, especially among outside workers. In the 
winter months, moreover, the percentage of sickness increases and 
with it the percentage of absences. High humidity, snow, and rain 
augment the rate of tardiness and absenteeism. 

Finally, experience is the basis for the conclusion that a more or 
less definite relation exists between religious belief and the distribu- 
tion of absenteeism. Many orthodox Jews, Roman Catholics, and 
Seventh Day Adventists absent themselves from work in order to 
attend important services of their churches or, as in the case of 
orthodox Jews and Adventists, to keep their sabbath, which falls 
on Saturday. 

Some Economic and Social Results. The economic and social 
losses accruing from absenteeism and tardiness cannot be deter- 
mined accurately. It is difficult to make even an approximate 
estimate of such losses because so many factors and considerations 
are involved which do not lend themselves to dependable measure- 
ment. In the first place, there is a lack of convincing evidence con- 
cerning industrial absenteeism because records are still inaccurate 
and incomplete. Only about one out of every ten organizations 
attempts to understand this problem or makes any effort to solve it. 
In many instances, it is impossible to discover what is included in 
statistical data on absenteeism, and frequently no allowance seems 

1 BRTTNDAGE, op. cit., pp. 350-351. 
* QUINBY, op. tit., pp. 716-717. 



ABSENTEEISM AND TARDINESS 267 

to be made for such items as vacations. In all probability a certain 
amount of absence from work is essential to the achievement of 
the highest efficiency, since it functions as a defense mechanism 
against physical disability. 

Despite these and other qualifying considerations, students of 
scientific management and employers of labor have generally con- 
cluded that the percentage of absenteeism and tardiness is far in 
excess of the normal requirements of the individual workman far 
too great to assure the maintenance of maximum efficiency. A 
conclusion equally general in its acceptance is that employers, 
wage earners, and society suffer definite losses from excessive 
absenteeism. A few attempts have been made to determine the 
economic losses incurred from this cause. The Dennison Manu- 
facturing Company determined the average loss to be 42 cents a 
week to each female factory worker and 49 cents a week to each 
male factory worker, the conclusions being based upon an average 
weekly wage paid to its employees at the time the study was made. 
The total wage loss was put at $50,000 a year. An industrial 
concern in Detroit having a large working force stated it was 
spending about $50,000 a month to prevent absences and considered 
the money well spent. 1 A railroad company employing 1,692 office 
employees estimates that for the year 1925 the average loss per 
employee on account of absenteeism was $46.20. 2 

Practically every employer recognizes that lost time is a source of 
waste for him. The absence of a regular worker means that 
machinery and equipment remain idle or are manned by less 
experienced workmen, if not by inexperienced ones. Occasionally, a 
less experienced workman performs the new task with greater 
enthusiasm than the experienced worker. Generally speaking, 
however, the output is not so great, and there is more likelihood of 
damage to machinery and equipment. Another source of waste 
growing out of absenteeism is the fact that frequently tasks and 
operations are performed by a group or gang, and unless every 
effort is made to train each of the workmen to take the place of 
the other, the absence of one or more of the group diminishes 
the general productivity. In any event, the absence of regular 
employees inevitably has an adverse effect upon the profits of the 
employer, if not through lowered efficiency in man power and idle 
equipment, certainly through changes in work schedules, increased 

i KEIB, J. S., op. tit., vol. 71, pp. 140, 141. 

2 HACKETT> J. D., "Lost Time," Management Engineering, vol. 4, no. 5, 
p. 406. 



268 THE MAINTENANCE OF PERSONNEL 

cost of administration in finding substitutes, and clerical effort 
required in recording and following up absences. 

The financial losses to absentee workmen have already been 
indicated. Figuring absenteeism at the conservative estimate of 6 
per cent per year or 18 days a year as an average for 30,000,000 
gainfully employed workers in the United States, Prof. Paul H. 
Douglas some years ago estimated a total loss of 540,000,000 work- 
days. By assuming an average wage of $5 a day, the total wage 
loss was placed at $2,700,000,000. This was, of course, exclusive of 
lost time caused by strikes, lockouts, and unemployment, which 
would have swelled the total to an enormous figure. 1 By applying 
these same rates to the present army of 50,000,000 gainfully 
employed workers, the current losses would be estimated at the 
staggering totals of approximately $4,000,000,000 annually. But 
immediate and direct financial losses are not the only form of 
waste to the workman. Absenteeism breeds absenteeism, insta- 
bility, and wanderlust. Moreover, when absenteeism becomes a 
habit, which it easily does, there is not only this general moral 
degeneration but a distinct loss of skill and efficiency. Interest in 
the occupation and in the plant is decreased, and returning to work 
the laborer finds it difficult to get started and to regain his old stride. 
A lowering of output is especially noticeable among pieceworkers 
when absence has interrupted their habit of work. 

That society sustains a loss on account of lost time there can 
be no doubt. Whatever tends to lower the efficiency of industry 
and reduce its output is inevitably reflected in a lessened supply of 
commodities and a higher price level. Moreover, it must be 
remembered that by decreasing the income of the workmen, absen- 
teeism makes them less able to meet the normal needs of themselves 
and their families and may necessitate some form of direct or 
indirect relief from the community or state. 

Methods of Improvement. In most organizations, little attempt 
has been made to reduce absenteeism to the unavoidable minimum, 
but in the increasing number of cases in which a more enlightened 
and constructive personnel policy is being adopted the results are 
gratifying. Divers ways and means have been introduced to dis- 
courage unnecessary tardiness and absenteeism, the method being 
adjusted in many instances to the peculiarities of the local situation. 
The primary point of attack in any plan for the reduction of 
absenteeism is the establishment of an efficient department of 

1 DOUGLAS, P. H., "Absenteeism in Labor," Political Science Quarterly, 
vol. 34, December, 1919, p. 591. 



ABSENTEEISM AND TARDINESS 269 

industrial relations, the major functions of which will be the 
collection of data on absenteeism, analysis of the causative factors, 
and the provision of ways and means of reducing absences to the 
unavoidable minimum. Absences are usually reported daily to 
the central personnel office by the various foremen or department 
heads. Many companies insist that all such reports shall be in 
by 9:00 A.M. 

The follow-up of absences is an extremely important and delicate 
part of the program for reduction of absenteeism. On the second 
or third day of absence, a nurse or some other special investigator is 
dispatched to visit each absentee. This individual determines as 
far as possible the reason for the absence, probable length of dis- 
ability, and the opportunity or necessity of rendering some service 
in cases of sickness or accident. Frequently there is recourse to 
the diagnosis made by the attending physician, or the nurse makes 
an informal preliminary diagnosis and then enlists the service of the 
plant physician. One company recorded 30,000 home visits by its 
physicians and nurses within a period of a little over 2 years. The 
Ford Motor Company, the first to use the home-visiting system, 
succeeded in reducing absences from about 10 per cent to less than 
0.5 per cent by means of this system. 

The investigation yields many benefits to employer and employee 
alike. Investigators are constantly on the lookout for any sort of 
reaction toward the company, whether favorable or unfavorable. 
In this way, causes of discontent and deficiencies of administrative 
policy are often uncovered. If a foreman is not displaying the right 
attitude toward his men, or if the worker feels that the physical 
conditions of employment are undesirable and injurious to health, 
complaints will often come to the surface, provided the company's 
representative has the confidence of the employee. Misunderstand- 
ings sometimes develop from ignorance, oversensitiveness, and 
misinterpretation of facts and policies. The nurse can often iron 
out these difficulties and dispel misunderstandings. In many cases 
where dissatisfaction is discovered, the workers are invited to come 
to the employment office for a conference with regard to the causes. 
Moreover, this service enables the company to keep constantly 
informed of all cases needing assistance, either medical or financial, a 
practice which makes it possible to render help where it is badly 
needed. Such aid often creates a feeling of gratitude and stimulates 
appreciation and loyalty. 

General knowledge of the fact that absences are investigated 
tends in itself to reduce the rate of absenteeism materially, and 



270 THE MAINTENANCE OF PERSONNEL 

prompt medical aid cuts down the length of the absence in cases of 
sickness. Even if attendance records are not considered in wage 
adjustments, the moral effect is good. If a workman knows that 
every absence is recorded, he is less likely to be thoughtless about 
laying off. Moreover, these records have value as a basis f6r letters 
of recommendation when employees leave the company for service 
with another which requires such letters, and they become a power- 
ful incentive to a creditable attendance record when workers realize 
the significance of this use of data. Finally, this whole service 
makes possible a personal contact which is badly needed in these 
days of large-scale production. Many companies which have 
introduced investigation of absences report that they have met little 
or no opposition on the part of the workers, owing to the fact 
that the visiting nurses are very careful as to the kind of impression 
they create. After all, the degree of success achieved by this deli- 
cate service will depend upon how the thing is done and who does 
it. Due regard must be given to the psychological aspects of the 
situation. Instead of sending out a nurse or a "white-collar" 
clerk, some companies appoint a rough and ready factory man to 
conduct the investigation, believing that he is better qualified to 
approach the workers than are those who do not belong to the same 
occupational group. Attendance records have been bettered by 
these and many other plans. 

With regard to all forms of investigation, it is necessary to 
exercise tact lest the workers judge the whole scheme excessively 
paternalistic and become antagonistic to a policy which often 
redounds to their own advantage. Many workmen have legitimate 
excuses for being absent from their work, and many others are 
absent in search of better jobs. Unless great care is exercised, 
investigation may degenerate into inquisition, and the workers' 
resentment will be justly aroused. Too early investigation, more- 
over, involves unnecessary labor and expense, HO most companies, 
especially the larger ones which do work of this sort, do not begin 
the investigation until after an interval of 2 or 3 days. This tends 
to preclude hasty interference with the personal business of the 
workman, so that if he is taking a day off to look for a new job or is 
just resting for a day or two he does not have to worry about a visit 
from the company representative. 

Sometimes this problem has been met by slight changes in the 
working schedule. One company solved its problem, largely one 
of punctuality, by shifting working hours from the usual office 
hours of 9:00 A.M. to 5:00 P.M. to a new schedule of 8:45 A.M. to 



ABSENTEEISM AND TARDINESS 271 

4:30 P.M., with 45 minutes off for lunch instead of the customary 
hour. 1 After this simple change, employees avoided peak traffic 
hours in traveling to and from work. This method is possible only 
in cases where no rigid hourly schedule within the working day has 
to be followed. 

Many companies adopt more exacting methods to reduce tardi- 
ness. Fines are frequently imposed. One company discovered 
that about 95 per cent of tardiness occurred within the opening 
half -hour, so a small fine was levied on lateness within that period, 
that the habit was checked considerably. Another introduced the 
plan of docking each worker's time 15 minutes if he was late any 
fraction thereof. A steel company began to send out weekly reports 
to each department head showing the standing of his department on 
absenteeism as compared with the entire " organization." As a 
result of this close check up, absenteeism decreased from 24 per 
cent of the payroll to 8 per cent in 10 months' time. 2 Daily reports 
are now sent out, causes are determined by the supervisors, and 
records are returned to the personnel office. After several days, the 
personnel office sends out an investigator to the home of the 
employee, not to spy on the absent worker, but rather to offer aid 
and advice if such is needed. In developing this plan, the worst 
shop in the plant had a punctuality record of 15 per cent during 
the first week, 22 per cent the second, 30 per cent the third, then 
44 per cent, and 6 years later, 58 per cent. All offices showed an 
increase in this rate from 68 per cent when the plan was started 
to 94 per cent 6 months later. 3 

Instead of imposing fines, some manufacturing firms follow the 
scheme of making tardiness difficult. If a man arrives late at the 
gate and feels that he has a legitimate excuse, his case is referred to 
the chief timekeeper who in turn refers it to the foreman. This 
plan has proved effective because workers prefer being on time to 
going through the unpleasant red tape. Latecomers are sometimes 
required to sign a slip stating reasons for tardiness. This "late 
ticket " is filed as a part of the personnel record. The Edison Elec- 
trical Appliance Company, for instance, attributes the 75 per cent 
reduction it has experienced in tardiness to an "honor system" 
whereby a tardy employee signs a slip, noting the time, which reads, 
"I am late." The signing of slips is not enforced, but slips turned 

1 "Staggering Decreases Tardiness," System, vol. 60, August, 1931, p. 109. 
* BERLINER, J. J., "Workers on Time When Competitive Spirit Is Stimu- 
lated/' Iron Trade Review, vol. 84, May 16, 1929, pp. 1317-1318. 



272 THE MAINTENANCE OF PERSONNEL 

in go to the department heads who prepare weekly tardiness reports. 
Each month every department is rated, and honorable mention is 
given to those with perfect records. 1 

As might be expected, fines and other exacting penalties have 
met with varying success, and there is a growing conviction that 
they do not constitute the most desirable method of reduction or 
elimination of tardiness and absences. Considerable feeling of 
resentment is aroused by them, especially when the proceeds from 
fines are appropriated by the company. Some firms guard against 
this undesirable effect by providing that the revenue from fines shall 
be placed in an employees' trust fund for the financial support of 
their general activities. Even with such safeguards, however, a 
system of fines can hardly be accepted as conducive to the best 
results, since many workmen will pay a fine feeling that, in so doing, 
all moral responsibility on their part for punctuality and regularity 
has ceased. In any event, it is difficult to distinguish between 
legitimate and unjustifiable fines, so it is better not to use them. 
Instead of resorting to a system of fines, some firms have endeavored 
to centralize responsibility. Absences are reviewed by the general 
superintendent and by the works manager who in turn takes up 
the matter with the department foreman. In cases of habitual 
absenteeism, the power of discharge is an effective and legitimate 
weapon. 

There are to be, found in industry varying methods of penalty 
and bonus systems ranging from this negative method of fines to 
the positive method of paying substantial cash bonuses. One year 
the Federal Life Insurance Company presented four of its employees 
with watches for perfect attendance. The following year, those 
with either perfect attendance or punctuality records were recognized 
in similar manner. As a result of this incentive, during the first 
9 months of 1929, 52 employees were eligible for attendance honors. 
The company accepted no individual excuses for tardiness or absence 
since the awards did not seek to place a cash value on punctuality 
but simply to recognize it. As a result of improved morale, less 
absenteeism, and less tardiness, the efficiency of the company was so 
increased that, although the company's life insurance business 
doubled in volume, the force in the department was augmented only 
60 per cent. 2 Obviously, not all this increased efficiency could have 

1 SMITH, C. P., "No One Likes to Say 'I am Late/ " System, vol. 59, April, 
1931, p. 291. 

2 CAVANAUGH, L. D., "Late or Absent," System, vol. 57, January, 1930, 
pp. 3&-41. 



ABSENTEEISM AND TARDINESS 273 

resulted from decreased absenteeism and tardiness, but the company 
does attribute a substantial portion of this improvement to these 



causes. 1 

The New York Stock Exchange allows any employee with a 
perfect record f6r 3 months to have 1 day's leave of absence with 
pay. After four quarters of perfect attendance he receives a total 
of 7 days. Honor days have no cash value, and no absence or 
tardiness is excusable. The Jewel Tea Company of Chicago refuses 
pay increases and promotion to an employee tardy three times 
during a 4-week period. A bonus is also given for perfect attend- 
ance. A record of the number of absences and tardinesses is posted 
every 4 weeks. During 1 year, two employees received $25 for 
perfect records, the following year eight were recipients of the bonus. 
Theater parties have been given to those with best punctuality and 
attendance records. As a result, the latter company reports that 
the average tardiness dropped from 10.3 times per employee to 
6.2 in 1 year. 2 

The percentage bonus is the most common device used for 
decreasing absenteeism and tardiness. The Metropolitan Life 
Insurance Company, after several years of experimentation, finally 
accepted this method as best suited for the needs of its home office. 
Under this scheme, 10 per cent of one week's salary (not to exceed 
$6) is offered to any home office employee with a perfect record for 
30 consecutive business days. Employees register in the morning 
and are required to return promptly after the lunch hour. It is a 
continuous incentive plan since, after an absence or tardiness, the 
employee may begin a new period. No distinction is made between 
avoidable and unavoidable tardiness or absence. 3 

The Leeds and Northrup Company, manufacturers of electrical 
instruments, has had an attendance bonus in operation for a number 
of years which applies to 313 men and 79 women out of a total pay- 
roll of 655 persons. Under this plan, if the weekly timecard shows 
punctuality every morning and afternoon, with perfect attendance 
during all working hours, a cash bonus of 5 per cent is added to the 
weekly wage. 4 The bonus is still paid if during the month not more 
than one unavoidable absence or tardiness is experienced. If the 
employee has a perfect record for 3 consecutive months, two absences 
or tardinesses are allowed before forfeiture of the weekly cash bonus. 

1 Ibid. 

2 "Tardiness," System, vol. 57, May, 1930, p. 423. 
8 Ibid. 

* ALFORD, L. P., editor, Cost and Production Handbook, 1934 ed., p. 655. 



274 THE MAINTENANCE OF PERSONNEL 

Largely through the influence of this bonus the management has 
been able to reduce the days lost to approximately 50 per cent of the 
average for competitors in the industry. 

Large companies usually spend more than small companies in 
offering this type of attendance bonus, but at most it has proven to 
be a profitable way to avoid losses which otherwise oftentimes cut 
deep into the profits of the management, not to mention wage losses 
of employees. Among 43 relatively small companies surveyed/ 
those employing less than 50 people were found to have spent during 
1927 an average of $46.38 each on attendance and punctuality 
awards. Those employing from 50 to 100 persons spent an average 
of $38.26; those with between 100 and 250 employees spent an 
average of $66.01 in making these bonus awards. Thus, with an 
increase of employees within an organization, it appears both neces- 
sary and wise to deal with this problem by the issuance of substan- 
tial awards for perfect records. 

The Case for the Bonus Plan. The bonus plan is an attempt to 
apply preventive rathor than remedial measures in establishing 
punctuality and regular attendance. Its chief strength lies in the 
fact that a powerful incentive is offered to employees for maintaining 
acceptable records. Perfect attendance and punctuality mean 
much to both the management and the worker. The employer 
suffers chiefly through the effect of tardiness and absence upon 
production. Any plan successful in diminishing these costly influ- 
ences is desirable. Especially is this so when improved results can 
be obtained at relatively little additional expenditures. For the 
worker, the bonus system is an incentive to decrease absences to the 
unavoidable minimum. 

Because it involves no element of competition, the individual 
bonus system has been rejected by some firms and in its stead the 
gang or group bonus plan has been applied. This system provides a 
bonus for the crew having the best production record. By pitting 
gang against gang, this scheme stimulates competition and thus has 
a definite effect upon tardiness and absence. There is a conspicuous 
effort on the part of the group to eliminate the habitually tardy and 
absent in order to assure a chance for the bonus. Many companies 
which have used the bonus plan in periods of labor shortage when 
absenteeism became a great source of waste and inefficiency have 
testified to the value of such an incentive. Frequently, it has 
reduced tardiness and absence 30 per cent or more. At the time of 

1 National Industrial Conference Board, Industrial Relations Programs in 
Small Plants, 1929, p. 43. 



ABSENTEEISM AND TARDINESS 275 

the introduction of the plan in one plant, only 69 per cent of the 
workers qualified for the bonus, but, in a short time, 81 per cent 
qualified, and the percentage of absence and tardiness was cut by a 
figure varying from 33 to 46 per cent in the various departments. 

But there are weaknesses to the bonus scheme. The necessity 
of making a fair adjustment of excuses may become burdensome and 
involve much time and expense. Certain executives contend that 
payment for promptness and regularity not only causes friction 
between management and men but is an inexcusable and unethical 
practice, because it is equivalent to bribing children to be good by 
giving them candy. It is appropriately asked: Why pay an extra 
amount of money for a duty and service which is understood to be a 
part of the employment contract and is to be expected as an essential 
responsibility in the fulfillment of the terms of that contract? 
Finally, when a worker has lost his chance for the bonus in a given 
week, he tends to become indifferent to the whole business after 
the first day's loss. 

Some Prerequisites to Improvement. No amount of rigid 
discipline, investigation, and bonus payment will be sufficient to 
reduce lateness and absence, unless the ordinary conditions of 
employment are such as to stimulate interest in promptness and 
regularity and to create a sense of loyalty and appreciation on the 
part of the workers. Specifically, this means many things. The 
wage scale must be adequate and compare favorably with the wage 
standards of other concerns. The physical conditions of employ- 
ment must be such as to encourage the protection of workers from 
accident and sickness. Cases of sickness and accident must be 
detected promptly, and, when necessary, workers must be sent 
home, given expert medical attention, and urged not to return to 
work until they are perfectly well again. The attitude of foremen 
and higher executives toward the employees must be congenial and 
their methods of supervision just, in order that causes of friction 
may be reduced to a minimum. The length of the working day 
must be reasonable, and overtime periods must be kept as low as 
possible. Every attempt must be made to encourage a spirit of 
cooperation, sobriety, thrift, and industry among the workers. 



UJbLAFTJUK AV 

THE STIMULATION OF INTEREST 

Cooperation and Interest in Industry. Industry is a cooperative 
undertaking between employers and workers. In speaking of the 
importance of close cooperative effort, Charles M. Schwab, one of. 
the great American industrialists, once said, 

Herein lies a field where expert service in enlisting the interest and con- 
fidence and goodwill of the worker is just as important as the study that 
has been given to the characteristics and utilization of materials. Happi- 
ness of the worker lies in the doing of the day's work with a zest and good- 
will, under the spur of encouragement and rewarded with the satisfaction 
of achievement. This requires the cooperation of labor itself not merely 
of the hand but of the heart as well. 1 

Such cooperation involves a live, intelligent interest in the 
particular job and enterprise with which one is associated. The 
millions of dollars being spent to create, restore, or maintain interest, 
good will, and cooperation on the part of employees is indicative 
of the importance of this factor in personnel administration. 

All too frequently employees are not interested either in the job 
or the company, and this lack of interest is a basic cause of industrial 
waste, spoilage, inefficiency, and conflict. Management is con- 
stantly asking why it is that men and women are not interested in 
their work and are so careless with tools and materials which cost 
large sums of money. Inability or unwillingness to make an analy- 
sis of the real causative factors is responsible for the common con- 
ception that such conditions develop from the natural indifference, 
indolence, and dishonesty of human nature, which impel men and 
women to want something for nothing. If, as is frequently the 
case, the modern workman has no impelling interest in his work, it 
may be because the conditions under which he toils are seldom such 
as to elicit ready response. Creative and efficient work is insepara- 
ble from a spontaneous interest in what one is doing. As we have 
already seen, modern industry usually tends to stifle rather than to 

1 SCHWAB, CHAELES M., "Human Engineering in American Industry," 
Railway Age, vol. 83, Dec. 10, 1927, pp. 1151-1154. 

276 



THE STIMULATION OF INTEREST 277 

stimulate creative interest in work. In many of our industries the 
worker is no longer an all-around mechanic, a skilled craftsman, find- 
ing real joy in the practice of his trade; rather, he is a machine 
tender, an automaton whose function it is to perform the same series 
of minute operations day in and day out throughout the year. One 
can hardly be astonished by the fact that the worker accepts this 
state of affairs as inevitable and unchangeable and devotes much 
thought and energy to the organization of movements for reducing 
the number of hours in the factory and increasing the rate of pay. 

Is this lack of interest indicative of the decay of human interest 
in creative work? Hardly. Because, outside the office and the 
factory, men and women spend hours in performing tasks in which 
they have a vital interest. A noted industrialist has remarked, 
"The workman who will loaf with consummate skill during the 
day may, at night, work very hard upon a dolPs house for his little 
girl, lavishing upon it all the tender care of craftsmanship. He has 
no interest in his daily task, but he has a deep interest in the home 
job that he has set for himself. Is this the fault of the man or the 
job? Why should he be interested in the one task and not the 
other? Both are work and the second will not bring the slightest 
financial reward/' 1 He ventures the answer now commonly given 
to this pertinent inquiry, namely, that in the factory job the worker 
probably does not know what he is doing but is simply going through 
a monotonous routine. An employee has little idea of the value 
of the thing he is doing or its relation to the final product. His 
responsibility ends with the performance of his limited task. In 
the planning of the work he has 110 more to say than the tool he uses 
or the machine he operates. Why should he be interested? How 
could he be interested? Making the doll's house is a different 
matter. There he plans the work, pays the cost, controls the job, 
and feels the emotional drive of creative workmanship. 

Does not all this suggest that the modern business and industrial 
executive may have given so much attention to perfecting the 
machine and the technique of production that he has disregarded 
the human factor? He has made machines so accurate that human 
dexterity is incapable of performing work with such precision and 
perfection and so automatic as to require only a minimum of human 
direction and skill. Perhaps the employer's indifference to the 
human factor is a consequence of the fact that he has been so 
engrossed in the task of creating an efficient organization to express 

1 BASSET, W. R., "Guiding the Creative Instinct," Factory, vol. 22, March, 
1919, p. 450. 



278 THE MAINTENANCE OF PERSONNEL 

his own individuality that he has entirely overlooked the fact that 
his workers covet the same opportunity for self-expression. Only 
recently has he awakened to the fact that machines will not operate 
themselves and that, no matter how mechanically perfect they may 
be, they will not turn out a perfect product unless fed with the 
right material, kept in order, operated correctly and at proper speed. 
It is becoming more apparent that an interested, loyal workman 
means a properly operated machine a result reflected in the reduc- 
tion of idle machine hours, lower repair costs, and lessened spoilage 
of materials. Work ceases to be burdensome, and even repetitive 
operations lose much of their monotony when the worker develops 
an intelligent and conscious interest in what he is doing and is given 
a measure of control over the machine. 

Stimulation of Interest a Problem of Good Management. A 
considerable number of executives have recognized the soundness 
of the conclusion advanced by industrial psychologists, namely, that 
one of the most fundamental and, at the same time, most difficult 
steps in successful management is to quicken the interest and release 
the productive energy of the vast number of men and women in 
industry who are now withholding their best efforts. The efficiency 
of any organization will never exceed the limits prescribed by the 
intelligence, interest, cooperativeness, and creative work of the men 
and women in the rank and file. These qualities will not assume 
desirable proportions so long as the average worker looks upon his 
day's work as a treadmill of drudgery, a task which must be com- 
pleted somehow and anyhow, and focuses his attention constantly 
on the hour of "knocking off." 

The problem is difficult to solve because mechanization and 
specialization are increasing, and because the process of concentra- 
tion and integration in the business and industrial organization is 
accentuating the impersonality which was introduced by the advent 
of large-scale production. It is not possible to escape from the 
machine-production division of labor and standardization which 
characterize modern industry. These are essential to economy and 
efficiency. Without them, the increasing number and variety of 
human wants could not be met. It is an inescapable fact, worthy 
of frequent repetition because of the modern " complex " against the 
machine, that mechanization has resulted in an enormous increase 
in output and brought within reach of the worker comforts and 
luxuries which yesterday were the portion only of the rich. Recog- 
nition of these conspicuous advantages of mechanization and scien- 
tific management, however, does not justify indifference to those 



THE STIMULATION OF INTEREST 279 

consequences which are essentially detrimental. The fact remains 
that these benefits have been purchased at a considerable price, and 
there are not a few people who question whether the results have 
been worth their cost. For it is still true that "we cannot get 
greater enjoyment out of life by simply increasing our possessions, 
but only by increasing our capacity for self-expression. Greater 
expression means manifestation of greater life and therefore a fuller 
realization of individual capacity, which, after all, is what we are 
striving for." 1 

There are only two ways out of the dilemma. Management can 
accept disinterestedness as a by-product of human nature and as 
inevitable under modern, mechanized, impersonal industry. It 
may refuse to do anything at all except to increase the supervi- 
sion, time the machine, and speed up the treadmill in order to 
guarantee efficiency. Or, management can recognize the true causal 
relation that exists between creative interest and creative work 
and, so, put forth every effort to recover the wholehearted coopera- 
tion of employees in the responsibilities of production. The latter 
is certainly the better method of procedure, whether measured in 
terms of industrial efficiency or in the larger terms of social progress. 

General Interests. The fundamental basis of interest in any 
particular task is to be found in the direction of general interests 
possessed by the worker. No matter how strong the incentive, the 
man who is able fully to appreciate fine symphony music is very 
likely always to continue to be an inefficient and disinterested steel 
riveter. The worker who has a general interest in mechanics is 
unlikely to be interested and happy at routine work in the office, 
especially if there is no chance for self-expression along mechanical 
lines. That the workers' interests differ greatly with different 
occupations is evidenced by a study of a comparison between the 
interests of salesmen and those of a number of other occupational 
groups. It was discovered in this study that the correlation between 
interests of life insurance salesmen and real estate salesmen was 
very high, but that there was a high inverse correlation between the 
interests of life insurance salesmen, on the one hand, and those of 
mathematicians or chemists, on the other, thus indicating practically 
opposite general interests. 2 Other comparisons are made by cor- 
relating the general interests of successful life insurance salesmen to: 

1 WOLF, R. B., "Making Men Like Their Jobs," System, vol. 35, January, 
1919, p. 35. 

2 STRONG, E. K., JR., "Interests and Sales Ability," Personnel Journal, 
vol. 13, December, 1934, p. 210. 



280 THE MAINTENANCE OF PERSONNEL 

Corre- Corre- 

Occupation lation Occupation lation 

Real estate salesman . 85 Accountant . 08 

Vacuum-cleaner salesman . 59 Minister . 04 

Advertising man 0.43 Teacher 0.23 

Y.M.C.A. general secretary 0.38 Artist * -0.44 

Office man 0.32 Physician -0.61 

Lawyer 0.31 Mathematician . 78 

Personnel manager . 26 Chemist . 88 

This is further indication of the importance of proper selection and 
placement, for without a suitable background stimulation of the 
worker 's interest in any particular job is bound to be almost 
impossible. 

Maintaining Interest through Financial Bonuses. Efforts to 
create interest assume the form of bonuses, premiums, or similar 
devices calculated to stimulate more persistent productivity. 
These devices are often successful. Frequently, however, their 
results are only temporary, because the cash nexus fails to conduce 
to sustained interest and cooperation. The workers come to view 
such payments as a matter of course, so some new stimulus has to 
be discovered. If incentives fail, the old antagonism and con- 
flict reappear, the employer proceeds to denounce the faithlessness 
and disloyalty of the employees, and the employees in turn con- 
demn the unfairness of the employer. 

Workers must have some interest in their jobs apart from the 
financial return something akin to the old pride in craftsmanship. 
Any program designed to stimulate interest in work must be 
accompanied by an honest plan for giving the workers a real voice 
in the government of the shop, control of the job, and determination 
of all those conditions which directly and vitally affect their own 
interests. Creative interest in work is also inseparably related to 
persistent emphasis upon quality rather than quantity production. 
Because income is so indispensable to the acquisition of the necessi- 
ties and comforts of life, every worker, is, of course, vitally interested 
in the contents of the pay envelope and consequently in the scale 
of wages. Since the length of the working shift and the physical 
conditions of employment are so intimately related to his physical 
and mental well-being and to the amount of leisure time he will 
have outside the plant, the workman is no less interested in desirable 
standards of hours and conditions of employment. But these are 
not adequate in themselves to assure the spirit of cooperativeness. 
A goodly measure of humanized control is essential. The interested 



THE STIMULATION OF INTEREST 281 

and loyal worker cannot continue as such and be treated as an 
impersonal machine tender or automatic stenographer. 

Every effort must be made to provide escape from the deadening 
routine and monotony of task performance. The worker must be 
taken into the confidence of management; he must be shown the 
reasons for shop rules and regulations which so often are a source of 
irritation. The organization and operation of the whole plant must 
be described in order that he may see his relation to it and his part 
in it. The relation of his particular job to other jobs and to the 
whole organization must be made clear to him in order "that he may 
understand his responsibility to his fellow workmen and to the 
management and thus realize how carelessness and inefficiency on 
his part may have disastrous results for them. Finally, he must be 
shown the relation of his job to the finished product and its impor- 
tance to the ultimate consumer. All this calls for a definite 
technique. 

Use of Production and Cost Records. A considerable pro- 
portion of conscious and unconscious inefficiency can be attributed 
to ignorance on the part of the workers and foremen concerning the 
cost of materials, equipment, and machines. Convinced that 
foremen and wage earners would become more economical and 
efficient if they were once made familiar with the fundamental 
meaning and purpose of what they were doing and knew the cost 
of the materials and equipment used by them, many employers 
have adopted the plan of disseminating facts concerning these 
matters. 

When the foremen in a certain plant were given a sheet showing 
the cost of supplies consumed each month by their departments, 
they immediately cut down the amount. Things had been wasted 
because no one knew what they were worth. In another plant, 
repair charges formed a considerable part of the overhead, largely 
because repairs were done leisurely and were an occasion for loafing. 
When, by means of a monthly cost sheet, each foreman was shown 
how wasted time was increasing the overhead burden of his depart- 
ment, repair bills were sliced in half. In some instances, daily cost 
sheets on work have been distributed among foremen, together with 
a comparison of present and previous costs. When these data are 
presented in the form of interesting graphs, workers likewise tend 
to become extremely curious about the movement of cost curves. 
The management of a large plant, confronted with the problem of 
reducing supplies taken from the storerooms for maintenance and 



282 THE MAINTENANCE OF PERSONNEL 

repairs, found it possible to stimulate interest in economy by 
placing at the storeroom window a list of current prices. A weekly 
bulletin stated the cost of the supplies used by each man or group 
for the current week, together with a comparison of the cost record 
for preceding weeks. 1 But these records are still far too infre- 
quently used in present-day organization. It has been said that 
only 3 per cent of the employees involved are informed of the results 
of studies designed to cut costs to a minimum. 2 

Some companies have discovered that lack of interest in work 
and economy is often the result of the failure to place definite 
responsibility upon wage earners. In one mill, it was found that 
spinning jennies were idle as much as 15 per cent of the time 
because the whole responsibility for the operation of the depart- 
ment was placed upon the shoulders of the foreman who was so 
burdened with other duties that he neglected to keep the automatic 
stops in repair. When the company made the operators responsible 
for putting and keeping the machines in repair, idle time was 
decreased 7 per cent, and output was increased 8 per cent, not to 
mention the saving which resulted from the lessened number of 
"rejects" on goods. In a factory which manufactures automobile 
parts, the idle hours on certain machines amounted to 36 per cent 
of the total. These machines were the "neck of the bottle" in the 
scheme of production, so their idleness slowed up the whole plant. 
Here, also, lack of interest and knowledge on the part of the workers 
was the important factor, and these in turn resulted from failure 
to give the workers responsibility for repairs. 3 In the General 
Foods Corporation (New York office), greater responsibility has 
been placed upon the office workers by reducing their supervision 
to a minimum and by doing away with the time check and empha- 
sizing the importance of completing the task instead. 4 

A blackboard has been used at times with remarkable effect to 
create interest in production and to stimulate pride in the company. 
Charts may be used to indicate the trend of output, costs, wages, 
and wastes. In one instance, a chart showed two graphic curves 
indicating the monthly production of the factory and that of the 
entire neighboring industrial region. The purpose of this chart was 

1 BASSET, W. R., "Developing Pride and Interest in the Job," Factory, 
vol. 22, April, 1919, p. 696. 

8 FRANK, T. B., "Man on the Job Needs Data," Iron Age, vol. 25, June 26, 
1930, p. 1879. 

BASSET, W. R., op. cit., p. 450, 

4 JANSEN, HAROLD E. f "Developing Employee Initiative," System, vol. 57, 
May, 1930, p. 422. 



THE STIMULATION OF INTEREST 283 

to show the workmen in the plant in which it was used the impor- 
tance of the organization in comparison with other factories in the 
district. It also made clear to each workman the position of the 
firm as a leader in its particular field, thus stimulating pride in 
the company. In another case, a more ambitious attempt was 
made of showing the yearly growth of the factory's output and its 
foreign connections. 

Contests as a Means of Increasing Production and Curbing 
Costs. What has just been said concerning the use of charts in 
stimulating interest and output and reducing costs -warrants the 
conclusion that psychology is good currency in modern industry. 
Many believe that the problem of efficient production is a psycho- 
logical rather than an economic one. To the industrial psychologist, 
well trained in his science and sensing the correlation between 
psychic forces and economic efficiency, industry owes much for the 
successful releasing of creative energy among the workers. 

The harnessing of psychic forces has been accomplished by 
means of contests calculated to stimulate interest, increase output, 
and decrease costs. Here the spirit of competition and rivalry, 
which so frequently finds emotional outlet in violence and destruc- 
tive action, has been sublimated. The inborn spirit of curiosity 
has been quickened into new life. Any activity that makes for 
harmonious, cooperative effort throughout the plant must inevitably 
react favorably upon the morale of the industrial family. 

Perhaps there is no better example of the successful use of 
contests than that which was put into operation by the General 
Electric Company in its lamp works some years ago. The company 
held several annual contests in its lamp factories throughout the 
United States and found that production records which were seem- 
ingly impossible under the unmodified monotony of ordinary con- 
ditions were accomplished with apparent ease in a contest. 
Although 75 per cent of the employees were women, the results 
indicated that the contest was equally effective among men and 
women, the resultant stimulation of interest, improvement of 
morale, and reduction of labor turnover applying proportionately 
to both sexes. 

The company found it necessary to vary the nature of the 
contest each year. In one year, the principal objective was the 
reduction of spoilage. Shrinkage due to spoilage during manu- 
facture is an important factor in operating costs in the lamp indus- 
try, which uses delicate glass and expensive metal parts. An 
effort was made to reduce the amount of spoilage through the 



284 THE MAINTENANCE OF PERSONNEL 

means of an " indoor baseball series." Each factory represented a 
team and was given a distinctive name, as the Giants or the White 
Sox. The idea was carried down through the various units of each 
factory. Scores were reported by telegraph, and the factory report- 
ing the lowest percentage of rejected bulbs was declared the winner 
on that particular day. The winner of the series was the plant 
which, at the end of the contest, had the lowest percentage of 
rejects. Other varieties of contests were used with equal success 
to achieve reduction in labor turnover, improvement in attendance, 
and a leveling up of morale. In each case, success was dependent 
upon the willingness and enthusiasm with which the plant execu- 
tives, including foremen, entered into the spirit of the scheme. 1 

Contests may be interfactory, interdepartmental, or intradepart- 
mental, depending upon the organization of the company and the 
problems and objectives involved. The spirit of rivalry, so promi- 
nent in athletic contests, is- capitalized. Each contest is planned 
and executed around a central purpose. The fundamental purpose 
will invariably depend upon time and circumstances. A type of 
contest which would be highly successful in a period of high pro- 
duction might not be at all adapted to slack times, and vice versa. 

During the recovery period of 1934-1935, a large Western 
bakery company built contest blackboards on the walls of the 
general sales offices where weekly sales meetings were held. Each 
week sales scores were posted and effigies of the ten leading salesmen 
were hung from the ceiling in front of the score boards. Sub- 
stantial cash prizes were offered for those leading in dollar sales 
volume during the contest period. For the ten highest, the com- 
petitive position of each was represented in effigy form by adding 
to their respective effigies pieces of clothing, first a shirt, then 
trousers, then socks and shoes, et cetera, toward the making up of 
full tuxedo dress. When the goal was reached the contest was 
ended, and a banquet of all sales persons was held. The ten lead- 
ing salespersons were required to attend this gathering in dress 
corresponding to that of their effigies at the time the contest ended 
in order to collect their cash prizes. This was an occasion for a 
celebration among the employees. The contest proved to be so 
effective in stimulating interest and production at a time when 
competition was becoming a serious menace to the company that 
this scheme, modified from year to year, has become an annual 
affair among the company's sales force. 

1 SCOTT, ROSCOB. "How Contests Have Helped Us Curb Costs, " Factory t vol. 
29, July, 1922, pp. 17-20. 



THE STIMULATION OF INTEREST 285 

If employment is scarce and labor plentiful, there is a natural 
competitive increase in efficiency among those who are fortunate 
enough to have jobs. During such times little stimulus to efficiency 
is needed, and contests are not so necessary or effective, except in 
the trades where there is a conspicuous tendency to make the job 
last. It is in periods of labor scarcity that the technique of contests 
can be used most effectively. Expenditures for contests must be 
governed by existing conditions. The experience of concerns 
that have tried the contest idea indicates that the results are not 
necessarily in direct proportion to financial outlay. Indeed, 
an inverse ratio sometimes appears. The length of the contest 
is an important consideration. Experience shows that to be 
successful they should not run less than one month and not 
longer than three. Shorter contests do not warrant the expense 
and time which careful planning require, and longer ones tend to 
drag and fail. 

Sharing of Information. The president of a successful business 
firm once remarked that the growth of a business must corne prin- 
cipally from within from the individual growth of executives and 
workers supplemented by a good product and real service to the 
consumer. In order to maintain the position it had gained, his 
company found it necessary to make the entire business understand- 
able to all the people in the organization. The specific aims of this 
firm were to give each workman a clear idea of what the business 
was all about, the particular part he played in the entire program 
of production, the things he could do to better himself in the 
organization, the possibilities of promotion and advancement which 
service in the company implied, and the correlation between 
various divisions of the enterprise. And an effort was made to 
impress the workers with the vastness and complexity of the 
enterprise. 

Every company faces, to a greater or less degree, the problem of 
disseminating information among its employees. Major and minor 
executives, sales representatives, office force, factory workers, arid 
all other individuals in the service of the company must be reached 
by a systematic giving of information if there is to be developed that 
interest in work and the enterprise that inevitably creates a "my 
job" and "my company" spirit. The function of imparting infor- 
mation, which will lift the individual out of the confines of his own 
particular job and enable him to visualize the organization of well- 
balanced activities, is essentially educational in nature. The follow- 
ing detailed list has been suggested: 



286 THE MAINTENANCE OF PERSONNEL 

The history of the company. 

The financial position of the company. 

Principles of organization, showing the interrelation between the various 

divisions and groups involved. 
The position of the company with reference to other enterprises in the same 

field. 

Sources of raw materials used by the company. 
State of raw materials as they arrive at the plant. 
Characteristic processes in the plant. 
Methods of transportation in and between separated branches of the 

company. 
The use of machinery and its effect upon the quantity and quality of the 

products. 

The development of new machinery and methods. 
The part played by suggestions from employees. 

Plant laboratories and the testing of raw materials and materials in process. 
The control of the quality of a product through inspection and special tests 

with the finished article. 
The packing and distributing of the product. 
The various uses to which the product is put. 
The salesman and his relation to the -consuming public and the home 

organization. 
The advertising methods of the company. 1 

Since the creation of an intelligent appreciation and the stimula- 
tion of cooperation on the part of all individuals in the service of the 
organization are the principal aims of the dissemination of such facts 
as are here enumerated, publicity rather than formal educational 
methods arc generally used in business. A more intensive educa- 
tional program is necessary where the purpose is to increase the 
efficiency of specific individuals or groups. Three principal sets of 
methods have been successfully used in American enterprises to 
distribute information among employees. 

Oral methods: 

1. Conferences. 

2. Club meetings. 

3. Mass meetings. 

4. Committee meetings. 

5. Individual messages. 
Written methods: 

1. Plant magazines or papers. 

2. Bulletin boards. 

3. Booklets and manuals. 

4. Bulletins, circular letters, or memoranda. 

5. Pay envelopes. 

1 LINK, H. C., "The Creation of Interest and Good- Will Through General 
Education in Industry: The Responsibility of Industry," Administration, vol. 
3, March, 1922, p. 335. 



THE STIMULATION OF INTEREST 287 

6. The company library. 
Miscellaneous methods: 

1. Motion pictures. 

2. Inspection trips. 

3. Special methods. 

Oral methods are often preferred to written methods because 
they make possible a more direct and personal presentation of data 
and prevent much of the misunderstanding which develops from 
the impersonal printed page. A system of conferences, which per- 
mits questions and explanations and affords personal contacts, is a 
popular oral method. Daily or less frequent conferences of execu- 
tives, foremen, arid representatives of employees are scheduled, at 
which information concerning costs, distribution of overhead, pro- 
duction, spoilage, and similar items arc discussed. Perhaps the 
chief objection to the conference method is its large consumption 
of time, but the time spent in well-planned and properly guided 
conferences will usually more than pay for itself in increased econ- 
omy of operation and improved methods of production. Clubs 
may be used for disseminating information. The primary function 
of clubs, however, is social, and they cannot be looked upon as gen- 
erally adaptable to the business of presenting company information. 

There is little doubt that the employees' mass meeting, 
supplemented by smaller group meetings, is of more importance 
than the preceding methods. The time and frequency of such 
gatherings of employees vary with the company. Some hold rallies 
or mass meetings about once a month from 8:30 to 9:00 P.M.; others 
conduct semimonthly meetings on company time at the end of the 
business day. The information presented at such gatherings is 
invariably a mixture of organizational, educational, and inspira- 
tional data. Considerable harm has sometimes accrued from 
employees 7 mass meetings, particularly when they have been con- 
ducted in a haphazard manner without any preparation or planning 
and without any well-defined objective or have been placed in charge 
of outside religious, political, or social organizations whose speakers 
made statements that offended certain groups of the workers. Of 
doubtful expediency is the practice of permitting meetings 
by outsiders who have special axes to grind and who make it their 
business to spread cheap propaganda. Not even the company 
itself should use employees' meetings for the ordinary purposes of 
propaganda. 

A workable technique for employees' mass meetings is of funda- 
mental importance, and includes not only a carefully prearranged 



288 THE MAINTENANCE OF PERSONNEL 

program but able leadership and dexterous guidance. When under 
the direction of an expert leader of discussion groups, open forum 
meetings are sometimes used to advantage because they permit free 
discussion and are stimulating. Such meetings, however, present 
almost insuperable difficulties, both from an educational and a 
practical standpoint. Their usefulness is limited to very small 
groups, because the response of large groups is usually weak and 
comes chiefly from inveterate talkers. Moreover, it is almost 
impossible to carry out a systematic program of education in mis- 
cellaneous group meetings. 

Committee meetings have assumed a major role in the dissemina- 
tion of information since employee representation schemes have 
become a permanent part of the mechanism of management in so 
many companies. Many employers recognize the practical possibili- 
ties of shop committees of elected representatives of employees, whose 
chief function it has been to establish a closer relationship between 
management and men. The last decade has witnessed a remarkable 
growth in representation plans, practically all of which provide for 
separate committees of employees' representatives or joint com- 
mittees of management and workers' representatives, with further 
provision for special joint meetings. 

These representative groups consider questions of interest to 
management and men: questions of policy, production, expansion, 
costs, wastes, grievances, and discipline. Often committees serve 
as workers' representatives who interpret to the workers throughout 
the organization the significance of production and cost records 
compiled by the management. The Hamilton Manufacturing 
Company, for instance, has disseminated information through a shop 
committee since 1919. The committee has used graphic charts 
which show labor, supplies, defective work expenses, and similar 
costs of the company by various departments. Before the end of 
the first year of the plan, the overall controllable costs were cut 
50 per cent, and by the end of the second year this figure was halved 
again. 1 

Committee meetings, whether separate or joint, constitute an 
effective medium through which to transmit the thoughts, feelings, 
and requests of employees to management and the wishes of man- 
agement to the men. The men are thus given an insight into the 
problems of management, and management has revealed to it the 
problems and aspirations of the workers. By the use of charts and 

1 SUDDARP, I. W., "Sharing Information with Employees," Manufacturing 
Industries, vol. 15, February, 1928, pp. 91-94. 



SflMVLAflON OP INTEREST 289 

statistical data, particular problems are analyzed and visualized in 
an effective manner. Through these committees employees submit 
recommendations on various matters of interest to them, and these 
are frequently accepted, provided they do not conflict with general 
policy, involve too radical changes in methods of operation, or are 
not too expensive. 

It is a universal practice in American industry to use the depart- 
mental system of giving information to employees. Individual 
messages are conveyed in this way. Heads of departments or fore- 
men are given instructions with the understanding that they will 
relay the information to their men. Personal conferences are also 
generally used for imparting to individual employees such informa- 
tion as is of special interest to them. A few years ago, an Eastern 
company received an order offering only a narrow margin of profit. 
All foremen and subforemen were called in and told the circum- 
stances. An appeal was then made directly to the men to help 
keep costs at a minimum, and in this way the order was successfully 
filled. 1 

The foreman or departmental supervisor has a real responsibility 
to perform in building up the workers' interest. Besides looking 
after the physical environment of those he supervises, he must 
explain to the worker how to earn more and how the paycheck is 
figured, encourage the worker when less work or pay is offered, 
advise how progress can be made, point out the company's prospects 
for future business, and assist the worker in developing pride in his 
own workmanship. He must bring new ideas into the department 
for the purpose of revising or maintaining interest and serve as 
general interpreter of the company's policies. It is his task to 
build up a spirit of cooperation and loyalty. 2 

Written Methods. Every American firm uses one or another of 
the written methods of imparting information to employees. The 
company magazine offers an excellent opportunity for frank discus- 
sions of company problems with the workers. The employee 
publication of the Nash-Kelvinator Corporation, for instance, has 
developed into a medium whereby employees are informed concern- 
ing manufacturing plans and the competitive position of the com- 
pany in the industry. 8 Through the house organ of the Ludlum 

1 See particularly, J. A. Buxton, "The Foreman's Job Getting and Holding 
the Workers' Interest," India Rubber World, vol. 92, August, 1935, pp. 39-41. 

2 KAUFFMAN, ALFRED, "Give the Facts and Get Cooperation," Manu- 
facturing Industries, vol. 16, May, 1928, pp. 21-23. 

aPoLLAKD, G. V., "Let's Tell the Employees," Factory Management and 
Maintenance, vol. 94, June, 1936, pp. 206-207. 



290 THE MAINTENANCE OF PERSONNEL 

Steel Company, the president talks frankly about the company's 
progress, showing that the company has some 40 competitors ready 
to take business lost by carelessness and broken sales promises. 
The 1934 business report which was published in this organ made 
plain to the workers straightforward answers to such questions 
as: Is the company showing a profit? Where do profits go? How 
does the future of the company look? 1 When perhaps two-thirds 
of those released from industry "do not care" when they are dis- 
charged, these frank talks cannot help but improve the morale and 
sharpen the interest of the worker in performing the work that 
brings him his livelihood. 2 

The bulletin boards are perhaps the most universally used 
medium. They serve practically the same purposes as the company 
paper but are even more direct and frequently more effective because 
their contents are more concise and conspicuous. The bulletin 
boards aim to give the maximum amount of information to the 
maximum number in a minimum of time. Here one finds brief but 
conspicuous notices concerning such matters as hours, holidays, 
wages, athletic contests, production and economy contests, changes 
in company policy and procedure, changes in streetcar and train 
schedules, social events, and educational activities in the plant. 
Bulletin-board forms vary. A blackboard is sometimes used. Brief 
notices are sometimes placed on the front of the time clock, espe- 
cially when the notice is urgent and important. Many companies 
require that notices on their bulletin boards shall be in poster form, 
with large letters to assure attention and reading. To be satis- 
factory, bulletin boards must be placed in strategic locations, must 
not be allowed to degenerate into catch-alls for irrelevant items, and 
must not be permitted to become cluttered with notices that are out 
of date. To insure economical and varied use, it has been suggested 
that companies should place bulletin-board control in the hands of 
the plant librarian or some other individual whose business it shall 
be to index each announcement, together with a definite date for its 
recall. 

Bulletins, circulars, letters, and memoranda are similar in nature 
and are used effectively. Periodical bulletins are issued for specific 
purposes, letters are sent out at regular intervals to certain groups of 
employees and executives, and special reports are circulated through- 

1 "Ludlum Steel Company Takes Mystery Out of Business," Sales Manage- 
ment, vol. 36, April, 1935, p. 376. 

2 Estimates made by Harvard University Bureau of Vocational Guidance. 
See Nation's Business, September, 1928, pp. 33-34. 



THE STIMULATION OF INTEREST 291 

out the organization. Factory heads sometimes circulate multi- 
graphed sheets containing messages for workmen. Many firms have 
a mailing list of the home addresses of all their employees, to whom 
an occasional letter is sent stating the financial position of the com- 
pany and discussing the business outlook. Occasion is also taken to 
express the management's appreciation of the work of its employees. 
Memoranda concerning changes in the routine of work, in forms, or 
in general policies governing production are sometimes distributed 
among department heads by the planning department, to be passed 
on to foremen and employees. 

Booklets and manuals are given by many companies to new 
employees as a means of familiarizing them with the nature of the 
organization and its general policies. The greater familiarity an 
employee has with the company's history, policies, and progress, the 
more likely is he to develop interest and loyalty. The chief diffi- 
culty with booklets and manuals is the lack of assurance that they 
will be read. On the other hand, if the information they contain is 
presented in an interesting manner, such sources of information 
may be valuable indeed, because they will be read not only by 
employees but, when taken home, by other members of the family. 
This stimulates group loyalty and interest. 

As a medium of publicity and information, the pay envelope has 
had general application. Notices and informational and inspira- 
tional paragraphs may be printed on small slips and inserted, in 
the pay envelope, or such data may be printed on the back of the 
envelope itself. This method has the distinct advantage of guaran- 
teeing that the worker will receive it. It is a method, however, 
which must be used with caution. Self-respecting wage earners 
object seriously to having the pay envelope used as a medium of 
publicity and propaganda, and they prefer not to have their inspira- 
tion stuffed in alongside their incomes. Mr. Link says: 

The pay envelope represents a purely mechanical business transaction, 
and as such should be treated with the restraint and dignity which accom- 
panies all other impersonal money transactions. By accompanying the 
pay envelope with a personal or paternalistic "preachment," the employer 
is more likely to arouse in the mind of the recipient a sense of the inadequacy 
of its contents. 1 

Payroll departments sometimes object to informational use of 
the pay envelope because it involves mechanical difficulties and 
considerable time and inconvenience. To address and enclose the 

1 Lnre, H. C., op. cti., p. 342. 



292 THE MAINTENANCE OF PERSONNEL 

proper pay requires such close attention that any additional work 
tends to increase the number and frequency of mistakes. This 
results in dissatisfaction and necessitates time and effort for 
adjustments. 

The development of industrial libraries is one of the promising 
by-products of company educational movements in the United 
States. Many of these company libraries have grown from a few 
uncatalogued books and papers in the main office to well-organized 
and expertly manned institutions. Sometimes they arc located in a 
spot most convenient to the greatest number of the employees and 
are some distance from the plant. They are no longer just an 
accumulation of books, magazines, and newspapers, but they have 
an active part in the intelligent 'direction of executive and employee 
reading. The technical needs of executives are ascertained and 
their attention called to especially helpful books and magazine 
articles; the interests of employees and their families are studied 
with a view to stimulating a wider reading of helpful literature. 
Either free of charge, or for a small fee, or as incidental to 
the employees' annual club dues, the families of employees are 
given use of the library facilities. To promote useful reading, some 
firms pay half of the subscription cost of technical magazines to 
which their employees subscribe. Many use their house organs to 
call attention to current magazine articles of importance, in some 
instances reproducing them by photostat for limited circulation. 
The library may also serve as the distributing agency for company 
bulletins, announcements, manuals, textbooks, and other material 
for educational courses conducted within the organization. 

Load Building Program of the Philadelphia Gas Works Com- 
pany. The practical value of interest programs is exemplified by 
the "Load Building Program" of the Philadelphia Gas Works 
Company. For many years, this company, serving natural gas to 
consumers in a large industrial center, was confronted with innumer- 
able engineering problems. Today, however, the picture is reversed, 
and the chief concern of the company is to build up the consumption 
of its service in competition with other types of utilities. The chief 
purpose of this program, therefore, is "to enlist the interest and 
cooperation of employees in promoting their own and their com- 
pany 's business." 1 

To this end, a special committee was created consisting of five 
executives appointed by the company president and five persons 
elected as employee representatives, to serve under the chairman- 

1 Philadelphia Gas Works Company, Load Building Program, Jan. 13, 1936. 



THE STIMULATION OF INTEREST 



293 



ship of the president's assistant in selecting subjects for discussion, 
passing upon texts to be used in the program, and receiving reports 
of progress and of criticism. The program is administered through 
regular company line organization, and is considered to be a normal 
part of each employee's task, so long as added expense is not 
necessitated. 

There are five steps involved in the stimulation of interest 
through this plan. Preparatory to the program proper, the Load 

DEVELOPMENT OF A LOAD BUILDING PROGRAM 
Working toward Larger Company Sales of Service 



Step 5 



Employee discussion 
meetings, review 
meetings, personal 
contact 



Step 4 



Step 3 



Step 2 



Group leaders' meetings 



Departmental staff meetings 



Distribution of booklets 



Step 1 



Executive staff meeting 



FIG. 22. 



Building Program Committee selects subjects for discussion. These 
subjects, relating to the company's sales and service work (such 
as the factors affecting size of customers' gas bills), are worked into 
a text draft which is sent to each Load Building Program committee- 
man, training supervisor, and departmental head. Comments and 
criticisms are presented, and the booklets are then printed for usage. 
The first step in carrying on the program proper, as the above 
diagram indicates, involves a discussion of each subject, led by the 
president near the first of each month in conference with his execu- 
tive staff. Next, every employee receives one of the program 
booklets, usually through the hands of his immediate supervisor, 
who informs the employee that the text reading will be supplemented 
by an open discussion, or by a personal conference with the super- 
visor. Then the department heads call their respective supervisory 



294 THE MAINTENANCE OF PERSONNEL 

staffs together to outline the avenues of further discussion of the 
topics. This done, the training representative of each department 
conducts an advance meeting of group leaders to review text mate- 
rial and methods of leadership. Finally, the text assignments are 
reviewed and supplemented by open discussion, review talks, or 
personal contact, and the program again reverts to a new subject 
which is followed through in the same way. 

By this simple method, and without appreciable added expense, 
the company has been able to stimulate widespread interest among 
employees. 

Miscellaneous Methods. Where it has been found difficult to 
stimulate interest, loyalty, and efficiency by the usual methods, a 
number of companies have resorted to certain rather unusual prac- 
tices. Presentation of information by means of motion pictures 
has succeeded in holding attention and getting ideas across to 
practically all employees. Although this is a costly method, unless 
used in conjunction with the educational program, it gets results 
because pictures are the universal language understood by all races 
and nationalities represented in the working force. Even the 
motion picture method, however, has to be used with precaution 
if it is to achieve desired results. Experience has proved to 
industrial concerns that educational films alone will not create and 
hold interest, but must be supplemented by other varieties of pic- 
tures. Large crowds of employees can be drawn to periodical 
meetings if educational films are used in conjunction with a film 
that is purely amusing or entertaining in character. 

Some companies have used inspection trips to great advantage 
in stimulating interest, improving efficiency, and developing the 
"my company " spirit. Employees are conducted through the 
entire plant in order to give them a conception of the organization 
as a whole. Occasionally such trips should be delayed until the 
employees have been with the company for some time, because 
they then have some intelligent foundation for the additional and 
more complex items of information that a survey of the plant yields. 
If such tours are to produce desired effects, preliminary education is 
necessary through the company paper, employee meetings, motion 
pictures, and other mediums to prepare the employees for what they 
are going to see and to show the coordination of the various depart- 
ments of the plant. The most fruitful inspections are those in which 
the guide gives a brief preliminary lecture. 

Some companies have made the introduction of special policies, 
such as pension plans, group insurance, and profit-sharing plans, the 



THE STIMULATION OF INTEREST 295 

occasion for presenting important items of information to the 
workers. The purpose here has been to stimulate interest and 
cooperation through a more intelligent understanding of the essen- 
tials of business organization and the fundamentals of the existing 
economic system. The introduction of such plans as profit sharing 
requires considerable preliminary publicity and this offers an admir- 
able opportunity for educational work. 

One of the most successful campaigns ever made by an American 
company for the distribution of stock was that launched by the 
General Electric Company among its employees. Approximately 
$20,000,000 worth of a regular stock issue was sold to its own 
employees. This phenomenal success was in no small measure 
attributable to the comprehensive and effective educational program 
carried on through the medium of the plant papers prior to the 
issuance of stock. The publicity items covered such subjects as 
the history of the company, its previous financial undertakings, the 
uses to which the desired capital would be put, the ways and means 
of accumulating capital, the function of capital in the operation of 
business, the transformation of labor power into capital goods, the 
principles of sound investment, the relation between risks and 
profits, and the significance of the company's financial statement 
and how to read it intelligently. 

Other rather ingenious methods of stimulating interest have been 
worked out in attempts to meet the peculiar needs of individual 
organizations. The policy of the El Paso Electric Company is to 
interest wives of employees in local educational contests under the 
plan suggested by the American Transit Association designed to 
promote public relations. Notifications of contests were sent to the 
homes, and prizes, including home electrical devices, were offered 
for the best paper 011 personal appearance, interest, and the like. 1 
Hotel companies have arranged for the exchange of positions of 
employees in order to bring new vitality and interest into the job. 2 
The General Electric Company, Royal Typewriter Company, 
Douglas Aircraft Company, and many others stimulate interest 
through the maintenance of athletic teams. 3 A large Eastern 
hosiery company has increased the interest and output of employees 

1 RICKS, E. C., ''Arousing Employee Interest," Mass Transportation, vol. 
31, August, 1935, p. 239. 

2 PAINTER, V. S., "Eleven Ways to Encourage Employees to Give Their 
Best/' Hotel Management, vol. 19, March, 1931, pp. 185-188. 

3 "Are Company Athletic Teams Worth While?" Printers Ink, vol. 152, 
Sept. 25, 1930, pp. 89-90. 



296 THE MAINTENANCE OF PERSONNEL 

by installing a radio broadcasting system within the mill, 1 and 
another company has installed an individual earphone system so 
that events under special broadcast can be heard by the workers 
during regular hours. 2 

Millions of dollars have been spent on advertising films, posters, 
booklets, and charts for the express purpose of soliciting the good 
will of the consuming public ; but only in a few cases have American 
corporations discovered the immeasurable service which the use of 
these will render among employees. Such materials enable the 
employees to visualize the company's and their own relationship to 
the folks who buy the products and services of the enterprise. 
This tends to increase the quantity and improve the quality of 
production. 

The Ultimate Effects. Creation of interest in the job and the 
company with its resultant cooperation, efficiency, and loyalty is a 
difficult task and the results of educational and publicity campaigns 
often seem extremely intangible. Yet, if there is any agreement 
among American concerns relative to the effectiveness of 
personnel technique, it is with regard to the beneficial results 
accruing from the dissemination of information among executives 
and the rank and file of employees. The interest of the employee 
in his work, his company, and his fellows has been definitely 
stimulated. An intelligent understanding of the difficulties of 
scientific management and the true status of the industry and the 
company has been promoted, thus eliminating many false and 
exaggerated ideas and notions harbored by employees. A broader 
understanding of the job and the industry has frequently proved an 
incentive to ambition and has encouraged men to develop their 
potential inventiveness in improving processes. Quantity and 
quality production have been improved with monetary advantages 
to the employee, increased earnings for the company, and more and 
better goods for the consumer. Finally, publicity campaigns, 
which have enabled the employee to visualize the productive and 
distributive phases of industry, have resulted in a deeper apprecia- 
tion of the relation of the job and industry to the ultimate consumer, 

1 " Radio Entertainment Improves Workers' Efficiency in Hosiery Plant," 
Textile World, vol. 83, June, 1933, p. 1103. 

2 " Baseball Game Leads to Increased Production," Factory and Industrial 
Management, vol. 77, January, 1929, p. 63. 



CHAPTER XVI 

TRANSFER, PROMOTION, AND DISMISSAL 

Definitions. A program calculated to stabilize the working 
force, create interest, arid cultivate loyalty to the organization is 
obviously incomplete without a definite system of transfers, a 
well-defined plan of promotions, and an intelligent supervision of 
dismissals. Transfer is usually regarded as the shifting of an 
employee from one task or position to another within the organ- 
ization which does not involve a change in the degree of skill; 
promotion refers to the placement of an employee in work requir- 
ing a higher degree of skill or more responsibility than was 
required by the former position. A change in wage rate need not 
necessarily accompany a transfer or promotion since a monetary 
reward for "better service can be classified as an " advance in pay." 
In common practice, however, wage increases are regarded as a 
form of promotion. 

It is well to bear in mind the essential distinction between 
transfer, promotion, and discharge. In the case of a transfer, the 
shift is more or less lateral, that is, the worker is moved to a position 
requiring a degree of ability and responsibility similar to that 
exacted by his former position. A promotion implies vertical 
advancement to a position which requires a greater degree of skill 
and experience or imposes heavier responsibilities, and is likely to 
pay a higher wage or salary. Discharge implies compulsory termi- 
nation of the employment relation on account of an alleged or known 
infraction of plant rules, insubordination, incompetency, or some 
other cause. 1 Dismissal is not to be confused with a layoff caused 
by lack of work and the necessity for reduced operating expenses 
usually brought on by seasonal and cyclical fluctuations in business 
activity. 

Causes Leading to Transfer. There are numerous reasons why 
it may be desirable to change an employee from one position to 

1 The United States Department of Labor defines discharge as "a termina- 
tion of employment at the will of the employer, with prejudice to the worker 
because of some fault on the part of the worker." (Monthly Labor Review, 
vol. 43, December, 1936, p. 1486.) 

297 



298 THE MAINTENANCE OF PERSONNEL 

another in the same organization. Sometimes, it is necessary to 
correct an erroneous placement. Regardless of the care exercised 
by the employment department in selecting and placing employees, 
conscientious workers are frequently assigned to positions for which 
they are inadequately qualified or in which they find it difficult to 
cultivate and sustain a creative interest. This situation may arise 
through error in the judgment of the individual who hired and 
placed the worker; it may be the result of conscious and willful 
misrepresentation by the employee himself at the time of the 
original interview and application. Or it may be attributable to 
overconfidence on the part of the worker with regard to his ability 
to fill the position successfully. Whatever the cause, he is a square 
peg in a round hole. There are many of his kind in every organ- 
ization. Fair play requires that the company assume the 
responsibility of giving a new opportunity to employees who have 
performed their tasks conscientiously, but have failed in a particular 
job on account of lack of ability to do it well or because of an 
absence of interest in it. In another position the worker may prove 
unusually competent. 

Another circumstance which may make a transfer necessary is 
the monotony that characterizes so many jobs in modern enterprise. 
In the interest of efficiency and good will, it may be imperative that 
the worker be given relief from the mental strain incident to the 
deadening sameness of the operation and the stifling influence of 
daily routine, whether these appear in the office or the factory. 
Standardization, systematization, and the automatic machine 
conduce to elimination of wasted effort, economy of materials 
and equipment, and large-scale production; they also present a 
tedium that issues in drab monotony, loss of interest, lessened 
personal efficiency, and cumulative discontent. In these latter 
effects transfers often find their raison d'etre. The importance of 
transfer in repetitive operations is recognized by a prominent 
employer who asserted that he never let a job become monotonous 
to any worker if he could help it; that as soon as he discovered a 
lag in interest and a loss of efficiency he made an investigation and 
transferred the employee to another position if that was deemed 
necessary and expedient. 

A reason for transfer may be found in the necessity of providing 
creative opportunity. It is common knowledge that normal human 
beings do not perform well the tasks for which they are not qualified 
or in which they are not interested. Although not so generally 
recognized, a no less significant fact is that men and women may 



TRANSFER, PROMOTION, AND DISMISSAL 299 

lose interest in work which once was decidedly attractive to them 
and in the performance of which they took delight. The essentially 
monotonous job is not here under consideration; reference is made 
to work which by its very nature is creative. No matter how 
creative the task, interest in it and zest for it over extended periods 
are difficult to sustain, and even the conscientious worker tends to 
lose the " drive " which he once manifested. This may be due to 
physiological changes in the individual. Creative work is not so 
general as advanced age approaches. But often the loss of interest 
and the accumulation of dissatisfaction with one's work is the result 
not so much of diminished physical and mental vitality as of the 
continual performance of the same task. As a change of climate 
may conduce to physical health and a change of environment to 
mental happiness, so a change of jobs frequently quickens interest, 
creates new vitality, and increases efficiency on the part of the worker. 

Transfer may be necessary in the interest of the health or age 
of the worker. On account of constitutional weakness or the 
disease-producing character of the work itself, it may be imperative 
to transfer an employee to another position. The existence of 
occupational diseases requires that constant attention be given to 
the matter of transfers in those occupations and industries which 
present hazards to health. Owing to injury or advancing age 
when an employee is unable to perform customary tasks, he may be 
transferred to the rehabilitation department or to some other 
department where he is assigned a job in keeping with his ability. 
Periodic physical examination is prerequisite to a workable system 
of transfers in such cases. 

"Blind alloy" jobs, into which both youthful and mature 
employees almost unthinkingly fall, may explain the need for 
transfer in many cases. Such positions offer no promise for the 
future, either in the form of increased wages or greater opportunity 
to rise in the scale of responsibility. In common justice, employees 
who manifest normal or unusual ability should be transferred to 
more promising jobs. 

Transfer may be necessary because of a decrease in work in 
certain departments of the same plant or in particular plants of the 
same company. Seasonal and cyclical fluctuations in business, or 
a falling off in orders arising from other causes may be responsible 
for the laying off of employees by certain departments or plants. 
In order to conserve the skill, experience, and training of old 
employees whose separation from the service of the company would 
result in considerable financial loss, it is now regarded as a judicious 



300 



THE MAINTENANCE OF PERSONNEL 



policy to transfer them wherever possible. Often such transfers to 
part-time or contingent forces avoid long layoffs or permanent dis- 
charge. Even though some trouble and expense may be entailed, 
maintenance is far better than termination of the employment 
relation in the case of deserving and competent employees. % 

Transfers are sometimes advisable in preparation for advance- 
ment or promotion. Many commercial banks, for instance, have 
a systematic plan of transferring promising young employees from 
department to department as a part of their program for training 
future executives. Sometimes transfer is made in preparation of 
promotion without the thought of junior executive training, but 
only for the purpose of giving the employee an opportunity to gain 
certain detailed experience within one or a few chosen departments 
of the organization. 

In recent years, many companies have adopted the policy of 
transferring key employees in order to train them for several jobs 
so that, in cases of absenteeism, tardiness, or emergency, the basic 
tasks throughout the organization can be performed with only a 

TABLE 7. EMPLOYEES TRANSFERRED ACCORDING TO YEAR OF SERVICE WITH 
A LARGE MANUFACTURING COMPANY* 



Year 


Male 


Female 


Total 


Percentage of 
number on 
payroll 


Total num- 
ber on 
payroll 


Fourth 


365 


491 


856 


34 


2 498 


Third . . . 


236 


369 


605 


28 


2,105 


Second 


264 


580 


844 


45 


1,855 


First 


213 


207 


420 


22 


1,918 















REASONS FOR TRANSFERS IN PERCENTAGE OF TOTAL EACH YEAR 





4th year 


3d year 


2d year 


1st year 


Advancing employees 


24 
10 
7 
5 
10 
31 

14 


19 
7 
8 
7 
45 
(Specific 
training 
13 


15 
10 
23 
6 

28 
departn 
establis 
18 


38 
11 
6 
15 
16 
lent for 
hed.) 
13 


Employees preferred other work 


No work in original department 


Unadapted . . 


Needed in other department . . . 


Training 


Miscellaneous 


Total 


100 


100 


100 


100 




1 MBINE, F. J., "Transfer for Factory Production Employees," Personnel Journal, vol. 6, 
February* 1928, pp. 367-378. 



TRANSFER, PROMOTION, AND DISMISSAL 301 

minimum of decreased efficiency. In this way, greater flexibility 
is obtained in the maintenance of the basic working force. 

A final reason for transfers may be found in the personal equa- 
tion. Not infrequently, discordant relations develop between 
department heads and their workers. Often there is conflict 
between the workers themselves, either on account of difference in 
race, religious beliefs, political views, and economic ideas, or because 
of the existence of nepotism, favoritism, and discrimination based 
upon the foregoing or some other equally irrational prejudice. In 
the interest of plant harmony and efficiency it is well that under 
such circumstances particular workers be transferred to other 
departments. The importance of the transfer problem can be seen 
in an analysis of the transfers taking place in a large manufacturing 
plant, as indicated in Table 7. 

Why Promotions Are Necessary. One of the most important 
problems of modern management is to interest employees both in 
the positions which they are now holding and in those positions to 
which the present ones are the stepping stones. Recent years have 
witnessed a widespread recognition of the relation of promotion to 
the solution of this problem. Promotional plans are now seen in 
their twofold significance; namely, as a just reward for performance 
in present positions, and as a source of potential rewards in the 
future. When actually granted, promotion functions as a recogni- 
tion and compensation for past performance; as an established 
phase of the managerial practice, it functions as an index to possible 
future growth and achievement. From the standpoint of the 
employer, promotions have value because of their influence upon 
the general attitude and reaction of the working force; from the 
point of view of the workers, promotions have significance on 
account of their relation to a just reward for faithful and proficient 
service. 

Promotions are inseparably connected with efficient manage- 
ment. This is true for several reasons. It is practically impossible 
to maintain a contented and cooperative working force unless there 
exists in the organization a definite policy of recognizing meri- 
torious service and special ability. Employees can scarcely be 
expected to be happy in a situation which offers no opportunity 
for growth, development, advancement, and increased compensa- 
tion. Promotions are essential in furnishing an effective incentive 
to initiative, enterprise, and ambition. Divorced from a share in 
the ownership of the industry in which they work, as most modern 
wage earners are, it is difficult for the average workman to become 



302 THE MAINTENANCE OF PERSONNEL 

enthusiastic over improved methods of production and increased 
output. Unless there is more than a haphazard system of recogniz- 
ing merit, the worker's interest in industrial and business efficiency 
and in self-government can hardly be expected to grow. Why 
increase output if he is not in some way to share in the consequent 
greater profit? Why improve his trade, business, or professional 
knowledge, if there is to be no opportunity for greater responsibility? 
Why be curious about improving present methods and processes of 
work if there is to be no recognition for this exceptional service? 
Thus the modern worker reasons, and his reasoning is indicative of 
the necessity for a promotional plan. To the ambitious workman 
promotional opportunities are as important as the rate of wages. 

Promotions are necessary, moreover, as a means of conserving 
proved skill, training, and ability. Workers will hardly remain 
loyal to a firm that makes no provision for the rewarding of faithful 
and competent service and offers no opportunity for the wider 
exercise of exceptional ability. Under such conditions, they tend 
to move about in search of desired opportunities, and the percentage 
of turnover in an establishment which provides none of these advan- 
tages is unusually high. Then, too, a definite system of promotions 
leads to a spirit of conservatism. It is obvious that the absence 
of opportunities for advancement in rank and pay, which are the 
normal manifestations of recognition of true worth, tends to increase 
discontent and general unrest among the workers. Nothing has 
created revolt against the existing economic order so much as has 
the conviction on the part of the wage-earner that in business there 
exists no necessary correlation between work and income, between 
merit and recognition. Corporations frequently find that the 
radical in the shop who possesses unusual powers of leadership may 
be converted into a cooperative employee by promotion to a position 
of responsibility. As an antidote for unrest, a promotional plan 
has considerable merit; it has far greater merit than has the cus- 
tomary American policy of forceful suppression and espionage. 

The effects of a properly devised and impartially administered 
plan of promotion are far-reaching. It determines the success with 
which suitable and competent workers are attracted to the service 
of the company, and defines the limits of success in holding 
employees. A promotional plan affects the interest and efforts of 
employees in systems of training and self -improvement, and deter- 
mines in a large measure the amount of good will and enthusiasm 
which prevail in the organization. The maintenance of discipline 
and standards of work is made easier, and the worker's general 



TRANSFER, PROMOTION, AND DISMISSAL 303 

attitude toward the present order of things is constructively influ- 
enced by such recognition of merit. 

Some Preliminary Steps. Transfers and promotions cannot be 
successfully effected in a haphazard manner; a definite plan must be 
formulated and maintained. There must be analysis and classifica- 
tion of positions and compilation and maintenance of an eligibility 
list. A complete and scientifically determined scale of wages and 
salaries for all occupations and positions in the organization is 
necessary. There should be definite rules governing transfer and a 
clear definition of the basis for promotions, together with accurate 
determination of the lines of promotion and strict adherence to 
these lines. A complete system of individual records is indispensa- 
ble. Education of employees with regard to the essential features 
and the importance and limitation of the plan will always prove 
helpful. Centralized supervision and control of the plan will assure 
sustained attention to the details of its application. 

Job Analysis in Relation to Transfers and Promotions. It is 
impossible to conceive a successful scheme of transfer and promotion 
without complete knowledge of the various positions in the organiza- 
tion. Such knowledge is contingent upon job analysis and specifica- 
tions. As definitely related to transfer and promotion, job analysis 
involves a careful study of three elements: namely, the positions 
from which men may be transferred or promoted; the positions to 
which men may be transferred or promoted; and the types of ability, 
skill, training, experience, and personality possessed by those who 
are to be transferred or promoted. In other words, the problem is 
one of knowing the requirements of the job and the qualifications 
of the man. Job analysis and man analysis are involved. All of 
this calls for standardization of requirements and duties, classifica- 
tion of occupations and positions, arid rating of human qualities. A 
loss in efficiency is experienced for failure to recognize these factors. 
In a large Eastern gas company, for instance, one young woman was 
recently transferred from a clerical to a telephone position where 
she did mediocre work. In talking casually to a member of the 
personnel department, she remarked that the instrument hurt her 
ears and impaired her hearing. She had always had a fear of tele- 
phoning, but she hesitated to tell her supervisor lest she lose her 
job. In view of this information, she was returned to her clerical 
duties. 1 Obviously such incidents would not arise if transfers were 

1 VICOL, E. A., "Rotation and Transfer of Employees," American Gas 
Association Monthly, vol. 18, December, 1936, p. 448. 



304 THE MAINTENANCE OF PERSONNEL 

made a three-way affair involving the department head, personnel 
manager, and the workers. 

Classification of positions involves primarily the grouping of 
all jobs and occupations having identical or similar requirements in 
the matter of skill, trade or occupational knowledge, experience, and 
responsibility. A uniform nomenclature must be applied. Each 
class of positions may be divided and subdivided into two or more 
grades according to refinements in their requirements. Such job 
categories will reveal the possible lines of transfer and promotion, 
make possible an equitable wage scale, and substitute standardiza- 
tion for chaos. Copies should be in the hands of the employment 
supervisor, the heads of the various departments, the superin- 
tendent, and the general office. All transfers and promotions should 
be made on the basis of this classification and deviations permitted 
only in exceptional cases. 

The Eligibility List, In order to assure effective and equitable 
adjustments in the working force through transfers and promotions, 
it is necessary that the employment office have up-to-date informa- 
tion concerning each employee in the organization. This may take 
the form of a card index, loose-leaf folder, or some other effective 
device. Whatever the system, it is essential that all necessary 
data concerning each employee shall be available for ready refer- 
ence. This information will include such items as those ordinarily 
contained on the application blank; the general and special qualifica- 
tions of the employee, his education, training, and experience; and 
his record with the company. As in the case of job analysis, the 
maintenance of a formal eligibility list is as yet not a widely accepted 
practice in personnel management. Its value, however, is unmis- 
takable. When vacancies occur in the more responsible positions 
it is an easy matter to select as candidates those best qualified by 
experience, training, ability, and performance. 

A Proper Scale of Occupational Wage Rates. A chaotic situa- 
tion exists in the United States with regard to the rates of pay for 
various jobs and occupations within individual establishments. 
Although certain organizations have met this problem through a 
scientific wage scale, positions requiring the same degree of skill, 
ability, and experience still pay widely different rates of wages in 
most organizations. Advances and reductions are often inconsist- 
ent, with the result that positions requiring considerable skill and 
responsibility sometimes pay lower rates than those exacting only a 
slight degree of skill and little or no responsibility. An effective 
and equitable system of promotions and transfers is obviously 



TRANSFER, PROMOTION, AND DISMISSAL 305 

impossible under such conditions. Men will not accept permanent 
transfer to positions requiring skill and ability equal to that of the 
old job if the rate of pay is lower, nor will they consider promo- 
tion to higher positions if there is not a corresponding financial 
recognition. 

Somewhat related to the matter of proper classification of occu- 
pational rates is the practice of periodic revision of wage rates for 
the whole organization. There are many men who are satisfied to 
continue in the same position year after year, provided the rate of 
compensation for that particular job is periodically revised upwards. 
This change in rate does not necessarily imply either transfer or 
promotion, but there can be no doubt that such revision in wage 
rates is a helpful supplement to any plan designed to effect these 
ends. Some companies make a practice of starting men at a com- 
paratively low rate of wages, on the ground that it is impossible in 
most cases to determine an equitable wage for the average new 
worker. This rate is readjusted periodically in accordance with 
increases in the worker's efficiency. Whether the review and 
revision of wage rates take place every month or every 6 months, 
it is a far better plan than the haphazard procedure, so common in 
American industry, of giving a wage increase only when the workers 
"kick" and demand it. There should be periodic review of payrolls 
in order to assure increases for deserving employees and to eliminate 
discrepancies in pay between similar kinds of work. In modern 
industry, the nature of jobs is constantly changing, and this calls 
for readjustments in wage scales. The periodic rating scale form 
presented in Fig. 9 offers a simple but effective method of carrying 
out these periodic adjustments. 

A Clearly Defined Basis for Transfers. The introduction of a 
system of transfers may result in serious difficulties unless definite 
rules governing such matters are formulated and made known to 
employees. The knowledge that a transfer can be obtained in the 
event of disagreement with supervisors may lead to artificial 
stimulation of antagonism in order to effect one. Foremen also 
abuse the privilege by forcing the transfer of desirable employees. 
Again, an employee may seek transfer merely for the sake of change, 
or to be near a friend or relative. Transfers inevitably mean a 
loss to a.department in cases where exceptionally competent work- 
men are assigned to another branch of the organization. These 
are admittedly real dangers but cannot be regarded as insurmount- 
able obstacles to the introduction of a transfer system. It is quite 
possible to safeguard the plan against such abuses by strict adher- 



306 THE MAINTENANCE OF PERSONNEL 

ence to the principles which should govern transfers. The following 
principles, for example, may be laid down: 

1. The existence of transfer privileges does not abrogate the employer's 
power of discharge nor is transfer to be considered a substitute for discharge 
except in special cases the merits of which are to be determined by {horough, 
impartial investigation. 

2. No request for transfer will be given serious consideration which is based 
upon a mere whim of the employee and has no foundation in common sense, 
necessity, or honest and well-founded preference. 

3. No exceptionally efficient and well-trained workman will be transferred 
from one department to another unless an equally promising employee is avail- 
able for the department from which the worker is to be transferred. 

4. No foreman's recommendation for transfer will be accepted without 
careful scrutiny of relations existing between the supervisor and the employee in 
question. 

It is manifestly necessary in this whole matter of transfers to 
adhere to practical considerations. Care must always be exercised 
not to undermine the disciplinary authority of foremen and depart- 
ment heads. Breaches of discipline and loss of cooperation on the 
part of these supervisory executives would result if there were total 
disregard of their wishes and prerogatives. When an employee 
requests a transfer, therefore, precaution should be taken to 
investigate the reasons for his desire, to consult the foreman and 
department head involved as to the merits of the case, and to 
ascertain the employee's qualifications and record as contained in 
the files of the employment department. Decision should not be 
reached until all concerned have been given an opportunity to 
consider the matter carefully. 

Transfers should never be made unless the employee is promptly 
informed as to the reasons for a change if the action is not being 
taken because of the worker's own request. It must be remembered 
that a transfer system is justified only when it serves to meet the 
dynamic conditions of employment. Abuses can arise here just as 
in any other useful method of meeting the needs and protecting 
the interests of both the organization and the individual. Shifting 
the worker too frequently or creating bad or discouraging conditions 
of employment is quite likely to make indifferent and inefficient 
employees. When transfer is a substitute for discharge, it under- 
mines the morale of the organization and so defeats its very purpose. 

Initiating an Acceptable System. When a system of transfers 
is inaugurated it generally involves several methods of procedure. 
All possible information should be secured from the initial applica- 
tion blank concerning the previous work, special talents, and par- 



TRANSFER, PROMOTION, AND DISMISSAL 307 

ticular interests of each new employee. Such data should be 
available at the time a transfer is contemplated. There should be a 
schedule of maximum limits of time which an employee is expected 
to remain in any one position and periodical rotation of positions 
in accordance with this schedule. Extensive and intensive training 
plans must be set up to make it possible for employees to qualify 
for new positions as they go along. An analysis of all the positions 
in the organization will contribute greatly to such a program. 

If, after an analysis of positions, certain jobs appear to be unduly 
burdensome, disagreeable, tedious, or monotonous, the job specifica- 
tion will state the fact, together with a statement of the length of 
time which any employee will normally be permitted to remain on 
these jobs without a transfer. Or, in operations such as sand 
blasting and those involving the use of lead, which tend to develop 
in the operatives an occupational disease, a periodical physical 
examination should be prescribed in order to discover the need for 
transfer. Immediate action is necessary for employees who show 
signs of occupational disease, in order that it may be checked in its 
incipient stages. Some companies aid these workers in finding 
more healthful jobs elsewhere if none are available in their own 
plants. 

The Basis of Promotion. Promotions may be a prolific source 
of discontent, suspicion, jealousy, and ill will. Such results develop 
from the prevalent conviction that in modern organizations promo- 
tion is frequently the consequence of pull, favoritism, or family 
relationship. Nothing is more destructive of the general morale 
than the practice of promoting men on the basis of favoritism rather 
than meritorious service to the company. But under the hap- 
hazard system which prevails in most establishments, it is almost 
impossible to make sure that advancement will be made on an 
equitable basis. No definite policy and system of promotion exist 
in most organizations ; each case is considered according to its own 
peculiar circumstances. 

Pull should have no place in the determination of advancement. 
The two most common grounds for promotion are merit or proved 
ability and seniority or length of service. It is a much mooted 
question in modern industry which of these two conditions of 
promotion should be the determining factor. Reasonableness and 
justice would hardly sanction a promotional plan which advances 
employees on the basis of length of service alone. It is doubtful 
if any establishment would continue to succeed under such an 
arrangement. Length of service is often an index of proved ability. 



308 THE MAINTENANCE OF PERSONNEL 

Certainly it is a manifestation of stability, loyalty, and dependabil- 
ity, all of which should be given weight in filling responsible positions 
and granting increases in wages. With years of service also should 
come increase in skill, general knowledge of the plant and its various 
departments, powers of leadership, and other desirable qualities 
which prove real assets in advanced positions. In short, seniority 
and ability frequently go hand in hand. 

From the standpoint of the management and the welfare of the 
enterprise, no promotions should be made on the basis of seniority 
in the absence of demonstrated ability and loyalty. Promotion for 
merit is regarded by American employers as the first prerequisite of 
equitable treatment. This is also a basic precept of modern person- 
nel administration. Wherever possible, length of service is linked 
to proved ability as the cardinal basis for advancement. Such 
procedure has a salutary effect upon the employment relation. 
Stability of the working force is encouraged because it is known that 
length of service will receive due recognition. Efficiency and ability 
are greatly increased because employees are given to understand 
that in the final determination of promotion competency is at least 
as important as years of service. The net result is a more con- 
tented and efficient group of employees. As Prof. Slichter has 
pointed out, "When workers can see a definite opportunity to 
advance by demonstrating their ability, they may be expected to 
take greater interest in the possibilities of their jobs and not to change 
readily to others the possibilities of which they do not know. Syste- 
matic promotion based upon merit is needed to induce workmen 
to take a long-run view." 1 

An Open Promotion Policy. Those interested in the formulation 
of workable plans of promotion are agreed that as far as possible 
advancement should follow openly announced and definite lines. 
This is desirable for several reasons. When the lines of advance- 
ment are clearly defined, employees will be promoted to jobs for 
which their previous experience and skill best equip them, and will 
advance through a series of positions designed to fit them for the 
most exacting, responsible, and remunerative positions that may be 
ahead. Moreover, a systematic organization of jobs will tend in 
most establishments to provide an outlet for each position in 
the plant. With well-defined lines of advancement established, 
employees may know definitely the positions that lie ahead of them 
and those which are immediately before them. Knowing the pre- 
cise nature of advanced positions, they can prepare themselves 
1 SLIGHTER, SUMNER, The Turnover of Factory Labor, p. 356. 



TRANSFER, PROMOTION, AND DISMISSAL 309 

for them with such additional education and training as may be 
required. This will have a favorable influence upon the reactions 
of the worker, since he can visualize the potential opportunities 
and see in the distance a possible goal. Constructive effort is 
difficult where the goal cannot be visualized. 

Maintaining Individual Records. The importance of a system 
of individual records has already been suggested in the discussions 
of the eligibility list and rating scale. It will avail little to establish 
lines of advancement if there is no systematic attempt to discover 
those employees in the organization who by education, training, 
experience, and general qualifications are deserving of consideration 
in filling advanced positions. Such a system of records has several 
advantages. It gives reasonable assurance that the most deserving 
and best qualified workmen will be selected for the positions of 
greater responsibility and higher remuneration. This conduces to 
justice in the employment relation. Then, too, such procedure 
diminishes the danger of overlooking especially competent employ- 
ees who are less aggressive than others and who do not normally 
make themselves known. Also, employees in need of special 
instruction and help are discovered, and the original judgments and 
decisions of the employment department in recruiting, selecting, 
and placing employees are effectively checked for revision. 

The specific items of information gathered for the individual 
record vary, but certain ones are commonly found wherever an 
attempt is made to maintain such files. These include attendance, 
application, habits, adaptability, proficiency, knowledge of depart- 
mental routine, general trade knowledge, discipline, dependability, 
general intelligence, industry, appearance, attitude, disposition, 
originality, ambition, initiative, stability, length of service, earn- 
ings, and physical qualities. Wherever possible these are checked 
in the light of actual performance. In addition to these items, there 
are such data as age, nationality, citizenship, race, religion, and 
marital relation, not all of which, however, are always called for. 

Rating Employees for Promotion. If merit is to be accepted as 
the basis for advancement, some reliable means of measuring it 
must be devised. Experiments have frequently been made with 
such instruments as intelligence, special abilities, and trade tests, 
job analysis and specifications, cumulative records of performance, 
and rating plans. 

Some organizations have found examinations the most accept- 
able method of determining the merits of advancement. A large 
subsidiary of the Socony- Vacuum Oil Company has instituted a 



310 THE MAINTENANCE OF PERSONNEL 

system of formal examinations for candidates to fill any plant 
vacancy. Since this system was adopted, study and reading by the 
workers has increased greatly. In administering this rating system 
the superintendent and his assistant formulate questions to test 
the worker's knowledge of the position, as well as his general and 
specific knowledge of the petroleum industry. In this way the 
company officials obtain definite information on the abilities and 
ambitions, as well as the past accomplishments of the worker. 1 
In certain research and actuarial divisions of the Metropolitan 
Life Insurance Company, all promotions are dependent upon a 
series of progressive examinations given once or twice each 
year. 

As has been previously mentioned, rating scales have gained 
considerable prominence in American industry. The Armco Com- 
pany has used what it calls the "annual labor audit" for the past 
18 years. 2 The Du Pont Company rates employees yearly, and its 
employee supervisors frankly discuss rating scores with the indi- 
vidual employees. 3 General Electric Company bases all promo- 
tions upon ratings. 4 The R. H. Macy department store supervisors 
rate employees. These ratings are then matched with the weekly 
production record of the employee as a basis for promotion. In 
order to overcome the personal bias inherent in rating scales of 
this type, at least three judgments are obtained for each person. 5 
In the latter organization increases in salary, transfer, promotion, 
or discontinuance of service is considered for each employee every 
6 months. This periodic review is made at a personal interview 
with the worker conducted by a committee composed of the depart- 
ment manager, floor superintendent, training supervisor, employ- 
ment interviewer, and a chairman assigned to conduct meetings. 
Each employee is told the results of the committee decision, and a 
special file is kept of those recommended for transfer or promotion. 

The main object of such evaluations is to develop the confidence 
of each employee in the impartial estimates of his efforts and to 
provide a "system'' for periodic review and warranted action. 
Information is sought on general qualities which are not definitely 

1 National Petroleum News, vol. 26, July 1, 1934, pp. 25-26. 

2 MURRAY, C. II., "How Armco Measures the Worth of Its Men," Iron 
Age, vol. 128, Sept. 3, 1931, pp. 611-613. 

3 WALTERS, J. E., "Personnel Maintenance," Factory Management and 
Maintenance, vol. 94, December, 1936, pp. 339-40. 

4 Ibid. 

6 CLARKE, W. V., "Rating Employees," PersonnelJournal, vol. 15, Septem- 
ber, 1936, pp. 100-104. 



TRANSFER, PROMOTION, AND DISMISSAL 



311 



measurable by means of quantitative instruments, such as physical 
vigor, initiative, personality, tact, cooperativeness, leadership, 
organizing ability, industry, and loyalty. Because human judg- 
ments are so variable, it is desirable to standardize the basis 
of them in the rating of employees. This the rating scale seeks to 
do, as is indicated by the sample shown in Fig. 23. A card is 
used on which it is possible to check or underscore qualifications, 



Branch 


22 


Name George 8. Perkins 


Dept. 


Loan 


Proposed monthly salary $200 


Position 


Assistant 


Present monthly salary $180 


Married or Single Married 


Age 31 






Total banking 
Other business 


experience 2 


years 


Date entered 
Prior increase 
Last increase 


service Sept. 1, 1935 


experience 3 


years 


June 


1, 193(5 $10 






Jari . 


1, 1937 $15 




Attendance, 
punctuality, 
and 
deportment 

(10) 


Initiative, 
interest in 
work, and 
cooperative 
spirit 

(15) 


Speed 
and 
quan- 
tity 
of 
work 
(20) 


Re-liability, 
accuracy, and 
quality of 
work 

(30) 


Value 
to 
depart- 
ment 

(25) 


Total Rated 
by 

(100) J.M.S. 




10 


15 


15 


25 


25 


90 



Do you consider the above, at present, to be: 

1. Capable of more advanced work? Yos_ 2. Suitably assigned? 
Remarks: Has shown remarkable improvement since coming to us. 



Yes 



FIG. 23. Promotional rating sheet. 

the nature of which is explained to each executive doing the rating. 
The use of such a plan not only tends to standardize the criteria 
used in judging employees but also to encourage close observation 
of personal characteristics and performance. 

The most effective rating scales conform to certain general 
principles. They contain only those qualities that are deemed 
essential in judging a man's fitness for specific positions. Each 
quality is accurately defined in terms of experience and the require- 
ments of the job. In the rating scale of the United States Army, a 
modification of which has been applied in many industries, each 



312 THE MAINTENANCE OF PERSONNEL 

quality was specifically defined. Physical qualities included phy- 
sique, bearing, neatness, voice, energy, and endurance. Intelligence 
comprised accuracy, ease of learning, ca>acity to grasp quickly 
the point of view of commanding officers, ability to issue clear and 
intelligible orders, estimate a new situation and effect an adaptation 
to it, and arrive at a sensible decision in a crisis. Leadership 
consisted of such qualities as initiative, forcefulness, self-reliance, 
decisiveness, tact, ability to inspire men and command obedience, 
loyalty and cooperation. Personal qualities incorporated such 
characteristics as industry, dependability, readiness to shoulder 
responsibility for one's own acts, freedom from conceit and selfish- 
ness, and willingness and ability to cooperate with others. General 
value to the service included professional knowledge, skill and 
experience, success as an administrator and instructor, and ability 
to get results. 

After specifying and defining the desired qualities, an exact 
system of weighting their relative values is devised, and a standard 
numerical expression of the degree in which a man possesses them 
is determined. The scale is so constructed that uniform ratings 
are possible. That is, two or more competent judges acting 
independently arc able to rate the same man with only a negligible 
difference in their scorings. Finally, the rating scale is so devised 
that rating can be done quickly and accurately. Impartial admin- 
istration is thus possible. The best results are achieved where 
human judgments are supplemented by reference to actual per- 
formance and experience records on file in the employment office. 
The promotional plan of some firms includes the individual experi- 
ence card, the rating scale with its consensus of judgment from 
several executives, and certain mental and trade tests. 

The original Scott Rating Scale, which was adopted for the 
United States Army during the World War, had only five qualities, 
but there are now scales in use with as many as twenty-five quali- 
ties. These are frequently given different weights, so that one 
may count a maximum of 5 out of 100, while another may count a 
maximum of 25. Instead of grading with numerical digits or 
letters, such terms as excellent, very good, fair, and poor are often 
used. The Graphic Rating Scale, developed by the Scott Company, 
has been the pattern for most scales used in industry. The graphic 
method allows ratings to be expressed on a line and makes possible 
minute distinctions. The result for each quality is expressed by a 
figure which represents the length of the line to the point marked 
off by the rater, divided by the length of the line as a whole. Thus, 



TRANSFER, PROMOTION, AND DISMISSAL 



313 



if the distance marked off on the first line is 2 inches and the line is 
5 inches long, the index rating for that particular quality would be 
forty. A profile can be obtained by then connecting the points 
marked, thus constructing a zig-zag line across a scale like that 
reproduced in Fig. 24. 

Regardless of the type of rating scale used, the common purpose 
of them all is to obtain more systematic and accurate evaluations. 
Although rating systems have proved valuable in choosing employ- 
ees for advanced positions, it is doubtful if complete reliance 
should be placed upon them. Specific instances for inconsistent 



Sp?H 








AeiMirfl-ey.-, --. -, 


Very fast Fast Medium 


Slow 




Knowledge.. 


Extremely Accurate Accurate 


Inaccurate 






Thorough Fair 


Deficient 




Imagination 


High Ordinary 


Lacking 




Cooperativeness 
Leadership . ,_ . 


Excellent Fair 


Unimaginative 


Exceptional Good Fair 


Poor 




Reliability 


Extraordinary Good 


A Follower 




Fully Reliable Fairly reliable Unit-liable 

NOTE: On each lino opposite each quality place a maik 
indicating the degree in which you think the 
person being rated po.v>essies the quality named . 
Connect the points checked. 



FIG. 24. Graphic Rating Scale. 

rating scores were cited in Chap. X. To rate an individual on the 
basis of several qualities instead of one and to have this rating done 
by several executives rather than by a single foreman unquestion- 
ably represents an advance over the earlier methods of appraising 
workers. Personal prejudice and subconscious bias are likely to 
be reduced in this way. Yet most rating systems begin and end 
with personal opinion. The reliability of such measurements of 
human qualities, therefore, will always depend upon a number of 
factors, such as the competence and fairness of those doing the 
rating, the degree of uniformity that can be accomplished among 
the several opinions rendered, the avoidance of superficial and 
hasty judgments, and the possibility of checking the information 
submitted. 



314 THE MAINTENANCE OF PERSONNEL 

A number of suggestions have been advanced for the improve- 
ment of rating systems. 1 It is urged that they should be more 
quantitative in character, that is, the items to be rated should call 
for factual evidence rather than mere personal opinion. Thus the 
quality of " industry" should be rated in terms of production 
records, and "accuracy" in terms of inspection records. Other 
items measurable in a quantitative way are education, training, 
attendance, physical condition, and experience. Care should be 
exercised in giving relative weights to these items. If quantitative 
determination is not possible because of lack of production data 
and similar objective records, the number of personal qualities 
rated should be kept at a minimum. The qualities chosen should 
not be rated in more than four or five degrees, namely, "excellent," 
"very good," "good," "fair," and "poor"; or numerically, 5, 4, 3, 
2, 1. The attempt to measure qualities mathematically on a 
straight line, as in the graphic rating scale, is regarded by many as 
a questionable refinement based upon subjective judgments. Such 
refinements, it is contended, are of doubtful accuracy and involve 
complicated clerical work. 

It may be queried: If rating systems do not have mathe- 
matical precision and are largely records of personal opinion, why 
use them, since in the final analysis modern industry and business 
rest upon subjective personal judgments? The successful execu- 
tives are those whose personal opinions produce valuable results. 
But best results are obtained when personal judgments are supple- 
mented by more objective evidences, such as records of attendance, 
performance, and cooperativeness. Despite their obvious short- 
comings, rating systems have marked advantages. They make 
possible deliberate rather than hasty evaluations. Provision is 
made for definitely recording a series of opinions which can be 
used by a department head or his superior as a check against snap 
judgment made under particularly irritating circumstances. There 
is an advantage in educating an organization to a better realization 
of personal values, since this encourages closer attention to the 
problems of selection, training, and promotion. Finally, the rating 
system provides a basis for agreement or intelligent disagreement in 
regard to the question of wage and salary standards. The real 
problem in connection with any rating plan is to find an effective 
means of determining the value of the rater's judgment. 

*LiNK, H. C., "Personal Opinion Records and Rating Scales/' Industrial 
Management, vol. 67, February, 1924, p. 80. Also see bibliography for Chap. 
XVI. 



, CHAPTER XVII 

TRANSFER, PROMOTION, AND DISMISSAL (Continued) 

The Three Position Plan of Promotion. No plan of promotion 
has been given wider recognition than the one outlined by the 
Gilbreths in what they designate as the "Throe Position Plan of 
Promotion. " It is described in their own words as follows: 

The Three Position Plan of Promotion considers each man as occupying 
three positions in the organization, and considers these three positions as 
constantly changing in an upward spiral. . . . The three positions are as 
follows: First, and lowest, the position that the man has last occupied in 
the organization; second, the position that the man is occupying at present 
in the organization; third, the highest, the position that the man will next 
occupy. In the first position the worker occupies the place of the teacher, 
this position being at the same time occupied by two other men, that is, by 
the worker doing the work, who receives little or no instruction in the 
duties of that position except in an emergency, and by the worker below who 
is learning the work. In the second position the worker is actually in 
charge of the work, and is constantly also the teacher of the man next 
below him, who will next occupy the position. He is also, in emergencies, a 
learner of the duties of his present position from the man above him. In 
the third position the worker occupies the place of the learner, and is being 
constantly instructed by the man in the duties of the position immediately 
above. 1 

As suggested by the authors, such a plan makes necessary a close 
coordination ,of all the positions in the organization, which is 
achieved through the medium of a master promotion chart. This 
chart, which varies with the establishment, is placed in the hands 
of the individual to whom control of promotion has been entrusted. 
It represents a schematic arrangement of all positions in the organ- 
ization and clearly defines the lines of most rapid advancement 
for the worker. In this way, the needs of the organization are 
definitely specified, and the worker's potential opportunities for 
increased pay and responsibility are visualized. Both transfers 
and promotions are facilitated by this scheme and it is possible to 

1 GILBRETH, FRANK B., and LILLIAN M. GILBRETH, "The Three Position 
Plan of Promotion," Annals of the American Academy of Political and Social 
Science, vol. 65, May, 1916, p. 290. 

315 



316 THE MAINTENANCE OF PERSONNEL 

eliminate the so-called "blind-alley" jobs, or at least to preclude 
from them workers of promise and ability. 

The education and interest of the worker in promotional oppor- 
tunities are cultivated through the individual promotion charts, 
which contain records of each member of the organization. When 
a worker enters into the employment relation with the firm, the 
man in charge of promotions prepares and assigns to him a promo- 
tion chart, or "fortune sheet," which shows his present position 
and the possible and probable lines of his advancement if he makes 
good. The authors present the following explanation of this 
individual chart: 

The sheet then becomes his fortune map, or fortune schedule. The 
projected line of promotion is outlined in green, and upon it are placed the 
dates at which it is hoped he may reach the various stages of advancement. 
At set times the worker and the promotion chief, or one of his helpers, meet, 
and the line of actual progress and advancement of tlie worker is traced 
upon the map in red, with the dates of achieving the various positions. 
The two then consult as to existing conditions, the special reading or study- 
ing necessary for fitting for the new positions, possible changes, or 
betterments. 1 

Such an arrangement necessitates job analysis and specifications; 
an adequate system of records; knowledge of each employee's 
training, qualifications, experience, and performance; constant 
attention ; and impartial administration. 

The Understudy System. Many firms have adopted the method 
of promotion known as the "Understudy System." Although 
the application of this plan is usually confined to executive positions, 
it may be extended to include practically the whole organization. 
When applied to executives, each person, from principal executives 
down to foremen, has an assistant, or understudy, who is preparing 
himself to take the position of his superior, temporarily in cases of 
emergency and permanently when possible and necessary on account 
of a vacancy caused by death, resignation, or promotion. A chart 
of the organization is sometimes prepared showing the various 
positions, the responsibilities incident to tfyem, the men holding 
them at present, and the men who could be advanced to fill the 
vacancies that might occur. The plan, which has been used suc- 
cessfully by certain railroads, has proved decidedly effective in 
training competent executives. Definite responsibility is imposed 
upon executives to select promising assistants who can succeed 
them if necessary. 
1 Ibid., pp. 291-292. 



TRANSFER, PROMOTION, AND DISMISSAL 317 

The general policy of hiring from within the organization is 
followed universally by most corporations. In a survey of the 
practice among commercial banks, reports that "98 per cent of our 
positions are filled by promotion," "when a vice-president dies we 
hire another page/' and "all of the new officers since organization 
have been made by promotion from the clerical force/' are indicative 
of the general policies followed. 1 Some banks have carefully laid 
plans for promotion. In one institution, for instance, the bank has 
been divided into five divisions, and the head of each division is 
requested once each year to prepare a list of the best 10 per cent 
of the employees upon a basis of present worth and potential ability. 
The basis of selection here is (1) best in group, (2) doing well in 
present jobs, (3) possessing more than average ability, (4) having 
capacity for further development, and (5) necessary for carrying 
on the work of their respective groups. From this original list, a 
second list, then successively third, fourth, and fifth lists are 
composed through which additional qualifications weed out the 
weaker candidates until the final list contains the names of those 
within the organization who by all methods of analysis seem to be 
the strongest candidates for present or prospective positions. The 
inclusion of a name on the final list does not insure immediate 
promotion if no suitable opening exists, but it does insure thorough 
consideration when and if the bank needs new officials. 2 

The American Rolling Mill Company of Middletown, Ohio, 
encourages men to prepare themselves for advancement through 
study and special effort. The director of employment visits each 
plant every month and talks with officers and workmen about 
promotion timber. 3 The Armco Bulletin publishes notice of every 
promotion. A selected list is maintained at all times, and a 
"promotion prospect " book is placed in the hands of every official. 
This book gives the history and picture of every technical and 
well-trained man employed in recent years, with reference to the 
possible position for which the candidate is being groomed. In 
this way the company has an intimate knowledge of each employee. 
Once every year a labor audit is made, after which each man is 
classified according to the progress made. 4 

1 Industrial Relations Section, Princeton University, Personnel Programs 
in Banks, 1935, p. 24. 

2 Ibid., p. 25. 

3 "Promote Employees from the Ranks/' Iron Age, vol. 123, Jan. 17, 1926, 
pp. 204-207. 



318 THE MAINTENANCE OF PERSONNEL 

Promotion from Within. There can be no doubt that promotion 
from within an organization is a desirable policy and offers distinct 
advantages over recruitment from outside sources. There will be 
occasions, of course, when it will be both desirable and necessary 
to go outside the organization to find men qualified for the available 
positions. The type of employee wanted for an advanced position 
may not be found in the plant, or it may be expedient to bring in 
new blood. But ordinarily, vacancies can be filled from the firm's 
own employees. 

The case for promotion from within is a good one. Such pro- 
cedure usually makes possible a whole series of promotions. When 
men are advanced from the simpler operations to the more complex 
and responsible positions, vacancies occur all along the line, new 
employees being recruited from the outside only to fill the vacancies 
in the simplest jobs. This has a desirable effect upon the entire 
working force and serves as a great stimulus to interest and general 
cooperation. It is too much to expect old employees to look 
complacently upon the practice of bringing in outsiders to "grab 
off the plums," as one disgruntled worker put it. Once the workers 
are convinced that the latter pra/ttice prevails, the cultivation of 
good will and stimulation of interest and loyalty are impossible, and 
competent employees seek elsewhere for larger opportunities. But 
if employees are aware that it is an established policy of the firm 
to fill advanced positions from its own working for^, there is a 
conscious effort on the part of ambitious workers to prove their 
ability and improve their efficiency. This is especially true if 
the company maintains a formal system of individual records which 
chart the achievements of each workman. 

Still another advantage of promotion from within is found in its 
effect upon the recruitment of new employees. If the firm has a 
reputation for giving its own workers the first opportunity to assume 
the more responsible and better paid positions, a desirable class of 
workers will seek employment with it. Quite apart from these 
distinct merits is the fact that considerably more reliable informa- 
tion is available concerning the qualifications and performance 
of the company's own employees than can be assembled for those 
coming from the outside. If the company has anything approach- 
ing an enlightened employment policy, its files contain accurate 
and reliable data concerning the ability, training, experience, 
cooperativeness, loyalty, and performance of each of its workers. 
In recruiting employees from the outside, it must necessarily rely 
to a great extent upon the opinions and judgments of former 



TRANSFER, PROMOTION, AND DISMISSAL 

employers, who have no particular interest in the company's 
welfare. 

Men qualified for the vacant positions are not always available 
within an organization. Moreover, it is somewhat of a temptation 
to retain competent workers in their present positions because of 
their proved ability in them. This temptation has given rise in 
many cases to the undesirable practice of retarding deserving 
employees. In some instances, one finds the policy of promoting 
from within rejected on account of increased cost of training or 
breaking in new workers for the series of vacancies which normally 
occur when such a system is used. Recruitment from without 
involves the breaking in of only one man; recruitment from within 
may necessitate the breaking in of many. Thus shortsighted 
employment managers argue against the practice, forgetting that 
the additional expense and trouble are more than offset by the good 
will and efficiency which issue from it. 

Request for Advancement. In every organization" there are 
employees who arc especially ambitious to advance to positions of 
greater responsibility and remuneration. To what extent is it 
judicious to encourage such employees to make known their desires 
and preferences? Many employers give no encouragement to 
requests for promotion, stating in defense of their position that their 
employment relations are so intimate as to yield complete informa- 
tion concerning the qualifications and desires of each worker. Plant 
and office executives are expected to be constantly on the lookout 
for unutilized exceptional ability, so that it is unnecessary to provide 
opportunities for appeal from those employees who may feel that 
their talents have been overlooked in making promotions. Still 
other employers refuse the privilege of requesting advancement on 
the grounds that to do so would encourage a deluge of petitions, few 
of which would have any merit. 

Despite such opposition, however, many companies have 
adopted some plan for receiving employees' requests for promotion. 
Some concerns advertise each vacancy on their bulletin boards, and 
employees are encouraged to make application for the position 
if they feel qualified to fill it, or to take the examination if one is 
required. Workers in some organizations are free to seek pro- 
motion at any time and are assured that their requests will receive 
careful consideration. Such requests are made to the immediate 
supervisor under whom the employees work or are brought directly 
to the attention of the executive in charge of these matters. There 
is a consensus of opinion, however, that the "open door" policy 



320 THE MAINTENANCE OF PERSONNEL 

has not yielded encouraging results, except for its favorable effect 
upon the morale of the workers. Experience indicates that ability 
is often lacking when ambition is conspicuously present. More- 
over, requests are often for advances in wages and not for additional 
responsibility. Then, too, there is a definite limit to the number of 
very desirable positions existing in any organization. 

Promotions Up and Out. In practically every organization, 
there is considerable unutilized ability. Employers will generally 
admit that there are workers in their establishments whose poten- 
tial capacities have inadequate opportunity for development and 
expression, and the more generous of them are willing to aid talented 
employees in obtaining the opportunities they deserve. 

In not a few instances, employers make a practice of promoting 
up and out. Capable employees are transferred to better positions 
in other plants operated by the same corporation, or an effort is 
made to place them in positions of responsibility with other firms. 
Personnel managers are frequently able to do a constructive service 
along these lines through the medium of the local association of 
employment executives and personal friends in other plants. 
There are employment managers, of course, who are opposed to such 
a practice on the grounds that it is asking too much of a business 
firm to release its best employees to other companies. Many other 
employment officers, as well as employers, regard it as a moral 
responsibility and consider it good business to help men of unusual 
ability find greater opportunities elsewhere, provided their own 
organizations are unable to offer proper inducements to them. 
"It is true/' observes an employer, "that occasionally we might 
lose valuable trained employees in this way, but in the meantime 
we have profited by their efficiency, and the incentive we create 
through this policy all the way down the line more than compensates 
us for the loss of the valuable employee who has been promoted 
to another firm. Further, it is always beneficial to us to have good 
friends in other companies. " l 

Wage Increases as a Substitute for Promotion. Wages are 
sometimes increased in an attempt to compensate the worke'r for 
loss of promotion to a higher position, but additional remuneration 
will seldom prove an adequate reward. The following observation 
is a valid one: 

If, for example, a machinist is granted a foreman's wage on the old job 
in lieu of a foremanship, it can scarcely be said that he has been fully com- 

1 Quoted by PAUL F. GEMMILL, Industrial Management, vol. 67. April, 1924, 
p. 247. 



TRANSFER, PROMOTION, AND DISMISSAL 321 

pensated for the loss of promotion in rank. For once a foreman, he may 
be in line for a whole series of executive promotions; whilst as a tradesman, 
even a highly valued one, his field of development is sharply limited. 
Despite the contention of some managers that " promotion" means to the 
workers not greater responsibility but more money, there are plenty of 
workers who recognize that the two usually go together, and who are willing 
to undertake the one to secure the other. Evidence of this fact is the large 
number of high executives of today who were once workers in the ranks. 
The statement that a wage increase is adequate compensation for arrested 
promotion remains, therefore, to be proved. 1 

It is doubtless true that supervisors are sometimes responsible 
for loss of promotional opportunity to employees of exceptional 
ability and proficiency. There is a great temptation for a depart- 
mental head to hold on to an unusually competent worker who may 
be qualified to fill a position of greater responsibility, since thereby 
his own department's efficiency is maintained. Employers, how- 
ever, are quite inclined to condemn such procedure as unjust to the 
worker and deleterious in the long run to the company. 8ays a 
large employer of labor, "We believe there is no quicker method of 
destroying incentive and morale than to deny a man promotion 
because of high efficiency in any job. This would be a very weak 
and selfish policy, and would react violently against the company's 
interest." 2 

"Blind Alley" or "Dead End" Jobs. A serious problem in many 
industries is the kind of job which leads nowhere and gives to the 
worker no promise for the future. These arc commonly referred 
to as "blind alley" or "dead end" jobs. There is little or no solu- 
tion for this problem in industries in which the majority of jobs are 
of this character, but in other industries much can be done and is 
being done to provide an outlet to better positions which open up a 
field of opportunity. 

In this connection, it is necessary to recall the fact that there is 
a type of worker, sometimes referred to as the "blind alley man," 
who is content to remain indefinitely in the same position and who 
has no desire to advance to a job requiring greater preparation and 
exacting more responsibility. There is John Jones, for example, 
who, ever since that first year when he entered an Illinois machine 
shop as an immigrant worker, has remained at the same drill press. 
For 25 years now, he has performed his job faithfully and content- 
edly. A short time ago, we went back to the old shop and found 

* Ibid., p. 245. 
*Ibid. 



322 THE MAINTENANCE OF PERSONNEL 

him at the same machine. " Still here, John/ 7 we remarked. " Yes, 
still in the same old groove." Then he added: "But I like the 
groove." It is difficult to get men like him to accept new positions, 
especially if these entail additional responsibility and training. 
Ambitious workers, however, will not long remain in "dead end" 
jobs but will change their employment relationship if advancement 
is not forthcoming in the old establishment. 

Responsibility for Transfers and Promotions. The traditional 
practice in American industry is to place the responsibility for trans- 
fers and promotions upon the overburdened foreman, who has at 
his disposal neither the time nor the facilities for intelligent handling 
of such matters. Seldom now does a progressive firm permit a 
foreman to make a transfer or promotion solely on his own initiative 
and authority, but it is indispensable that he shall have an active 
part in this phase of personnel work. This must always be so, 
because the foreman, more than anyone else, possesses firsthand 
knowledge of the ability and performance of the employees who are 
under his supervision. Frequently, promotions and transfers are 
made by the superintendent upon recommendations of foremen, 
and in many cases the personnel department is also consulted. 
Promotions to high executive positions are usually left to the chief 
officers of the company, but, in the case of positions of lower rank, 
there is a tendency to provide for cooperation between the super- 
intendent, departmental heads, and the personnel manager in making 
final decisions. Such cooperation is highly desirable and is doubt- 
less the most effective and practical method yet devised. 

Factors Limiting Transfer and Promotion, Generous policies 
and advanced methods of transfer arid promotion are not always 
practicable because of conditions peculiar to particular organiza- 
tions. The attitude of boards of directors and high executives is 
always a limiting factor. The nature of the business or industry 
and the size of the organization will inevitably have an influence. 
A plan which works well in an organization employing 3,000 men 
will not do at all for firms having only a few hundred employees. 
A scheme which is effective in a steel mill might be totally ineffective 
in a department store or a general office. In short, no ideal system 
of transfers arid promotions has yet been devised, and it is hardly 
to be expected that a universally applicable one will be forthcoming. 
Whatever may prove to be the character of the plan, it will never be 
successful unless a definite attempt is made to give the employees 
an intelligent understanding of its fundamental principles and 
methods. 



TRANSFER, PROMOTION. AND DISMISSAL 323 

Causes Leading to Discharge. The discharge of employees is an 
essential function of effective organization. Progressive employers, 
however, know that the firing of a worker is not always the easiest 
and quickest way out of an unfortunate situation. The arbitrary 
and dogmatic discharge of even one single employee of a company 
has often been responsible for serious ill feeling on the part of many 
members of the working force. In many instances, discharge by 
the employer has led to a break in industrial relations in the form 
of long and costly strikes. On the other hand, management's 
failure to take prompt and deserving action against a member of the 
working force who is not worthy of employment with the company 
always threatens the morale and discipline of the organization and 
can lead to gross negligence and decreased efficiency, which add to 
costs of production and, in the long run, tend to lower both profits 
and wages. 

There are many reasons why -discharge is necessary. The per- 
sonnel or employment department may have exercised poor choice 
in selection. Training or instruction may have been so meager 
that the employee had little chance to succeed from the start. In 
other cases, personal character or conduct may make it imperative 
to sever the employment relationship. In a special inquiry into 
the hiring and firing procedure followed by 149 bakeries, the United 
States Department of Labor discovered that inefficiency (reported 
by 88 companies), dishonesty and theft (86 companies), drunken- 
ness (79 companies), and either carelessness or indifference were 
among the chief causes for the discharge of employees. 1 Other 
causes are accidents, insubordination, personal conduct, uriclean- 
liness, infraction of rules, fomenting discord, destructive negli- 
gence, wastefulness, and physical unfitness. In a study of the 
common causes of discharge of office and clerical workers within 
76 corporations, 2 it was discovered that 90 per cent of the cases were 
discharged because of character traits, 14 per cent for carelessness, 
11 per cent for lack of cooperation and laziness, 8 per cent for 
absences other than those caused by illness, 8 per cent for dishonesty, 
and 10 per cent for lack of specific skills preventing promotion. 

Discharge Warning. The discharge rate for American industries 
is set forth in Fig. 19 in Chap. XIII. In all matters of discharge, 
the employee's case should receive careful consideration, and all 

1 "Personnel Policies and Working Conditions in the Baking Industry," 
Monthly Labor Review, vol. 43, November, 1936, p. 1108. 

2 "Discharge of Office arid Clerical Workers," Monthly Labor Review, 
vol. 42, February, 1936, pp. 346-347. 



324 THE MAINTENANCE OF PERSONNEL 

arbitrary discharges should be avoided. The procedure of a large 
department store is indicative of the technique that is often followed 
in matters of discipline: 

Dismissal where a replacement is to be made 

A. First six months of service. 

During the first six months as a regular employee, the person is to 
be considered as on trial and may, with the approval of the 
employment manager, be dismissed with a minimum notice 
(or pay in lieu of notice) of one week. The person must, how- 
ever, have received at least one caution by his supervisor (of which 
record was made on the employee's record card) that the work 
was not up to standard. 

B. Six months' to two years' continuous regular service. 

Before any notice of dismissal there must have been a definite 
warning given by the employment office, store superintendent, 
or division head that the employee's work is not up to standard 
and that unless there is an improvement within a specified reason- 
able length of time (not less than 2 weeks), the employee will be 
dismissed (or pay in lieu of notice of 1 week). The approval of 
the personnel director is required before such notice may be 
given. 1 

The discharging of employees is usually done by the person 
responsible for the hiring. In a majority of the 149 bakery plants 
covered by the Department of Labor survey, these two officials 
were the same person. Appeal from discharge to a higher official 
or mediation board was provided in 62 of the 140 plants reporting 
on this point. Among these, 4 had an established mediation board ; 
10 reported recourse through the trade union, and the remaining 
48 allowed a review of the case by the superintendent or a higher 
official. Many union agreements specify that a union representa- 
tive must determine if the reasons for discharge are sufficient, and 
some go even further by providing for mediation boards. 2 

Responsibility for Discharge. Traditionally the power of dis- 
charge has been vested completely in the hands of the foreman. 
In recent years, however, as indicated above, there has been wide- 
spread acceptance of the idea that the supervisor's power of hiring 
and firing should be curtailed, if not absolutely abolished. This 
radical departure from traditional method rests upon very plausible 
grounds. Industrial and business experience is replete with evi- 
dence of the fact that discharge is frequently the result of misunder- 

1 Industrial Relations Section, Princeton University, Personnel Programs in 
Department Stores, 1935, p. 50. 

2 United States Bureau of Labor Statistics, Monthly Labor Review, vol. 42, 
November, 1936, p. 1108. 



TRANSFER, PROMOTION, AND DISMISSAL 325 

standings between a departmental head and the individual employee 
and that the chief may be just as much at fault as the worker. 
Peculiarities of disposition, temperament, and personality form the 
basis of frequent disagreement and discord between employees and 
their immediate supervisors. Under another foreman or in another 
department, the worker, whom one supervisor discharges as unde- 
sirable, may prove unusually cooperative. Friction between 
workers and their supervisors is often the result of spontaneous, 
momentary anger or passion. When he has "cooled off/' a foreman 
frequently regrets his action in discharging an employee, and the 
discharged worker often laments his hasty display of temper. In 
the heat of the argument, conciliation is impossible and an impartial 
adjudication of the grievance cannot be made by either party to 
the dispute. Because of these circumstances, large numbers of 
discharges are unjust and a great many voluntary quits are un- 
warranted. Discharge is a responsibility which cannot be delegated 
as an absolute power to the average foreman. Some more 
intelligent and impartial system must be devised. 

In an attempt to control the power of discharge, some firms have 
confined the supervisor's authority to his own department, dele- 
gating to the employment manager or some other official the power 
to dismiss a workman from the service of the company. In the 
minds of certain employers who have a pronounced disposition to 
fair play, this practice does not go far enough, since there is still 
room for considerable injustice in allowing. the foreman to dismiss 
workers from his own department. Certainly it does not offer 
sufficient encouragement to the exercise of good judgment and pre- 
caution on the part of the foreman, in so far as his dealings with 
his men are concerned. For this reason some companies have 
limited the supervisor's power to the recommendation for discharge, 
final decision being vested in the hands of the personnel manager, 
a higher executive, or a joint council made up of representatives of 
management and men, with the privilege of appeal to the general 
manager or an arbitration board. 

There has been some opposition to the practice of curtailing the 
foreman's power of discharge, the position being taken that such a 
practice undermines his ability to maintain discipline. Foremen 
have been extremely jealous of their traditional powers in this 
particular and have manifested strong resentment when a change 
in policy modified or destroyed their control. This matter of dis- 
cipline, however, has v another side. Says Prof. Slichter, "It is a 
pernicious idea, a relic of the 'drive' system under which the fore- 



326 THE MAINTENANCE OF PERSONNEL 

man needed to command the fear of the workman, that the abso- 
lute right to dismiss from the department is necessary to enable the 
foreman to 'maintain discipline.' >J1 Foremen will not tend to 
exercise discretion and precaution in the matter of discharge if 
their power in this respect is absolute within their own departments. 
When, however, they can merely make recommendations for dis- 
charge and realize that their decisions are subject to review and 
revision by higher authorities and more impartial bodies, their 
action in such matters will be less hasty. The latter procedure 
substitutes responsibility for irresponsibility and consequently 
insures greater justice. 2 

Even where the supervisor's power of discharge is taken away 
and vested in some other official or group of officials, the results are 
not necessarily satisfactory. There still exists the feeling that it 
is usually expedient to sustain the action of the subordinate official 
in order to preclude the possibility of a breakdown in shop or office 
discipline. Or, if this is not true and the deliberations are strictly 
impartial, personal opinions and human judgments are still domi- 
nant in influencing final decisions. The official or committee must 
rely largely upon the opinions and testimony of the chief and worker 
involved, with the former's story having the greater weight in 
most cases. In the interest of complete justice it is necessary, 
therefore, to discover a standard or impersonal basis which can be 
substituted for personal opinion and the human equation. Indi- 
vidual records are as yet very imperfect, but they give promise of 
improvement over the old methods. Such records represent a step 
in the right direction. A quantitative, objective record of an 
employee's activities reduces to a minimum errors due to human 
judgment. If the departmental head has consistently given the 
workman a satisfactory rating in productive efficiency, attendance, 
punctuality, honesty, patience, dependability, moral character, 
length of service, loyalty, and obedience, some explanation will 
have to be forthcoming in case such a worker has been discharged 
or recommended for discharge by the foreman. He will have to 
square his judgment and action with the worker's record on file in 
the employment office. 

In order that the problem of discharge may be handled intelli- 
gently, it is also necessary to standardize as far as possible the 
basis for dismissal. This means that the reasons for dismissal shall 
be definitely stated and printed for distribution among employees, 

1 SLIGHTER, SUMNER, The Turnover of Factory Labor, p. 377, 
, p. 37& 



TRANSFER, PROMOTION, AND DISMISSAL 327 

and a copy of the rules and regulations given to each new worker 
when he enters the service of the company. 

Within a growing number of organizations, an intelligent han- 
dling of discharge has encouraged the establishment of impartial 
discipline boards, one of the best known of which is the arbitration 
board of William Filene's Sons Company of Boston. 1 Any com- 
plaints against discharge may be taken to the board for review, and 
the final ruling of the board in such matters is binding. The 
impartial attitude of the board is at least suggested by the fact 
that over a period of 21 years of operation, decisions favoring the 
store were rendered in 71 cases, and those favoring the appellant 
were rendered in 61 cases. Sometimes a similar board is given 
power only to recommend to the executives what final action should 
be taken in cases where a complaint has been registered against 
discharge; in other plans a final board of appeal is provided where 
the decision of an arbitration board may be protected. 

Government Regulation Concerning Discharge for Union and 
Other Activities. Until the passing of the National Labor Relations 
Act in 1935, it had been common practice among employers in all 
lines of business to discharge employees because of union activities 
or court testimony. This practice has been supported in part by 
the enforcement of the " yellow-dog contract'' and by the services 
of labor spies. It is estimated that in 1935 there were between 
40,000 and 50,000 labor spies in American industry, 2 mon hired 
either by employers or detective agencies to work along with other 
workers and report daily upon union activities of employees. Thus 
just as soon as a leader was apprehended he would be discharged 
under some such pretense as incompetency or insubordination. 

This practice was brought under partial control on Apr. 12, 1937, 
when the United States Supreme Court upheld the constitutionality 
of the National Labor Relations Act in five important cases. This 
law, applicable only to employees in certain industries engaged in 
interstate commerce, aims to encourage the practice and procedure 
of collective bargaining; to protect the exercise of the workers' full 
freedom of association, self -organization, and designation of 
representatives of their own choosing; and to aid them in negotiating 
the terms and conditions of their employment. To this end, the 
act, among other things, makes it unlawful for any employer coming 
within its scope to discharge or otherwise discriminate against an 

1 LA DAME, MARY, The Filene Store, p. 274. 

2 National Labor Relations Board, Governmental Protection of Labor's Right 
<o Organize, 1936, p. 15. 



328 THE MAINTENANCE OF PERSONNEL 

employee because of union activities or because of charges or 
testimony given against the employer. 1 Any violation of the law 
is subject to a restraining order from the National Labor Relations 
Board and may be punished by fine or imprisonment, or both. A 
second federal bill, the Fair Labor Standards Act, received serious 
consideration during the 1937-1938 sessions of Congress. Several 
of its major provisions, notably those which establish minimum 
wages and maximum working hours for American workers employed 
in interstate commerce, have already been enacted into the Wage- 
Hour bill which became a national law when President Roosevelt 
attached his signature to the act on June 25, 1938. Still to be 
enacted into law, however, is the original proposal to prohibit the 
employment of a worker for strike breaking or labor espionage duties, 
making such action a misdemeanor on the part of both employer 
and employee. 

While protective legislation passed so far has touched only a few 
of the thousands of employers engaged in intrastate business, there 
is, nevertheless, strong reason to believe that similar restrictions 
will soon be placed upon all employers, rogardloss of size and scopo 
of activities, through the enactment of individual state laws. In 
fact, during 1937, five states (Utah, Massachusetts, New York, 
Pennsylvania, and Wisconsin) enacted laws modeled after the 
National Labor Relations Act, 2 and it is safe to assume that others 
will soon follow. The state laws already passed regulate the 
employment relations of employees engaged in w r ork of a strictly 
intrastate nature. Provision is made for a commission to admin- 
ister tho law, guaranteeing to employees the right of self-organization 
and collective bargaining, and protecting them against discrimina- 
tory discharge as under the national act. 

Layoff. Layoff refers to a temporary suspension of the labor 
agreement because of poor business conditions, seasonal fluctuations 
in industry, or some emergency situation developing within the 
organization itself. The problem of layoff has become considerably 
more important during the depression period than that of discharge 
for cause and has much wider social implications. The problem has 
been defined as follows: 

Many more difficulties and decisions are involved in a general reduction 
of the working force than in the discharge of one employee. These ques- 
tions and others face the management: Who shall be the first to go? The 

1 For a fall statement of the provisions of the act, see Chap. XXXIV 

2 United States Bureau of Labor Statistics, Monthly Labor Review, vol. 45, 
October, 1937, p. 854. 



TRANSFER, PROMOTION, AND DISMISSAL 329 

least efficient? The more recently employed? Those who have fewest 
personal financial responsibilities? And whatever the decision as to order 
of layoffs, how can the company ameliorate the blow to the employee? 

The two factors given most weight in deciding upon layoffs seem to be 
efficiency and length of service. Personal need is not often mentioned as a 
deterrent to layoffs, but is often considered in determining the amount of 
the dismissal wage. The fact that the least efficient are not necessarily 
the employees most recently hired complicates the layoff problem. The 
long-service employees are usually considered first for openings in other 
departments, and it is principally for them that shorter hours and other 
spread-work devices are tried. But these methods do not always prevent 
some layoffs from this group. 1 

The Dismissal Wage. The dismissal wage may be defined as a 
"payment in addition to any back wages or salary made by an 
employer to a worker whose employment is permanently terminated 
for causes usually beyond the control of the employee." 2 In order 
to lessen the shock of the loss of income because of layoff or 
discharge, many organizations have offered a dismissal wage. 
During the recent depression period, more than 150 large companies, 
including public utilities, railroads, manufacturing concerns, and 
many smaller organizations, adopted the practice of giving tlio 
employee at the time of layoff or discharge the equivalent of 1 or 2 
weeks' wages in lieu of dismissal notice. 3 

The payment of a dismissal wage, however, is largely a depression 
product in the United States, although the practice was first 
introduced by the Delaware and Hudson Railway in 1922. Many 
foreign nations have made the payment of such a wage compulsory. 
At present, forty foreign countries require notice or compensation 
for dismissed workers, and twenty-three more have laws concerning 
special classes of workers. 4 In Brazil, for instance, the law of 1935 
applies to all persons who work for pay, and benefits are equivalent 
to 1 month's pay for each year of service or fraction thereof. In 
Austria, after the World War, stringent provisions were put into 
effect governing the discharge of workers, but were abandoned later. 
In Mexico, employees discharged through no fault of their own are 
given 3 months' pay. In Ecuador, employees of 1 year's service 

1 Industrial Relations Section, Princeton University, op. cit, p. 51. 

2 HAWKINS, E. D., "The Dismissal Compensation Movement," Annals of the 
American Academy of Political and Social Science, vol. 165, January, 1933, pp. 
24-30. 

3 BALDERSTON, C. C., Executive Guidance of Industrial Relations, p. 401. 

4 United States Bureau of Labor Statistics, Monthly Labor Review, vol. 40, 
April, 1935, pp. 847-860. 



330 THE MAINTENANCE OF PERSONNEL 

or more are given 2 months* pay. In Bolivia, allowances range 
from 1 month's pay for less than a year's service to 25 months' pay 
for 25 years or more of service. 

The present practice of paying dismissal wages to employees in 
American industries is not very extensive. In 1931, the National 
Industrial Conference Board found that out of 2,618 companies 
questioned only 53, or 2 per cent, were operating formal dismissal- 
wage plans. Thirty other companies paid such wages in special 
cases. 1 Approximately 212 or more American companies paid 
dismissal compensation at some time prior to 1934. 2 These firms 
employed 2,250,000 to 2,500,000 persons, and it is conserva- 
tively estimated that over $8,500,000 have been paid to 80,000 
employees permanently laid off by some 60 of the largest companies. 
Individual payments have been equal to as much as 1 or 2 years' 
wages or salary, but the amount of compensation for each person 
in 60 companies averaged $108.30. 

Plans for dismissal compensation payments vary greatly among 
different employers. Between 1929 and 1930, over 3,000 employees 
of the United States Rubber Company lost jobs on a month's 
notice owing to the closing down of several of the company's plants. 
Workers not pensioned were paid 1 week's pay for every year of 
employment, if the service record was 15 years or if they were 
forty-five years old and had a 10-year record. During this period 
500 employees received from $125 to $2,000, averaging $500. 3 
When the Norton Company closed down one branch plant, each 
employee not absorbed in another plant was paid $100 if the service 
period was 3 years; $150, if the record was for 5 years; and $150 plus 
$15 for each year of service above 5 years. When the Armco 
Company shut down a mill in 1929, it paid a discharge bonus of 
one-half of regular pay (minimum of $50 per month) for 6 months, 
or until new employment was procured. The Dennison Manu- 
facturing Company adopted a wage dismissal policy in 1929 by 
giving 2 weeks' pay where discharge was due to changes in method 
or merchandise. A plan adopted by Hill Brothers in 1931 provides 
1 day's pay for each month of service over 6 months, but it is 
paid only if the job is discontinued. General Foods Corporation 
gives 30 days' notice where a branch is discontinued. Employees 

1 Iron Age, vol. 128, Aug. 20, 1931, p. 517. 

2 HAWKINS, E. D., "Dismissal Compensation in American Industry," 
Monthly Labor Review, vol. 39, November, 1934, pp. 1067-1077. 

3 Sen WINNING, G. T., "Is The Dismissal Wage a Solution for Technological 
Unemployment, " Forbes Magazine, vol. 30, August, 1932, pp. 13-14. 



TRANSFER, PROMOTION, AND DISMISSAL 331 



with from 1J^ to 4^ years of service receive 2 per cent of the last 
yearly wage multiplied by the full number of years of service. 1 

Dismissal wages are not to be confused with unemployment 
compensation, for the former makes a final payment to the worker 
upon being dismissed from the company, whereas the latter is com- 
pensation during unemployment periods. Social pressure, the 
necessity of removing inefficient personnel, and desire to reduce 
labor turnover are the main reasons for the adoption of such plans. 2 
Numerous locals in over forty trade unions have agreements calling 
for dismissal wage payments in lieu of dismissal notice. Recently 
there has developed a definite tendency to extend dismissal wage 
coverages to hourly workers and those of medium service periods 
ranging between two and ten years. Several companies have found 
it necessary to raise the lower limit of service from one to five years. 
No agreement as to method of payment can be found among the 
plans now in force throughout the country. It is, however, inter- 
esting to note that whereas lump sums were formerly emphasized, 
periodic payments are now being gradually adopted. 3 Of sixty 
companies reported in a recent study, 1 thirty-five paid lump sums, 
thirteen made periodic payments and the remainder followed some 
combination of these two systems. As a rule dismissal wages are 
financed through general company funds, withdrawals usually being 
charged to wages. Only seldom are dismissal wages granted to 
employees who have been discharged as a disciplinary measure. 
Although a well-defined dismissal-wage system is a progressive 
development in the field of personnel administration, at best, such 
systems are only feeble aids in meeting the economic consequences 
of layoff and discharge. 

1 Ibid. 

2 See "Dismissal Compensation Plans," Monthly Labor Review, vol. 30, 
March, 1933, pp. 496-497. 

3 Industrial Relations Section, Princeton University, op. dt. t p. 52. 



CHAPTER XVIII 

WAGES AND WAGE SYSTEMS 

The Significance of Wage-payment Systems. The economic 
basis of wage payment remains unchanged, but new methods of 
computation are constantly being formulated and applied. Adam 
Smith, writing a century and a half ago in the Wealth of Nations, 
stated that "the produce of labor constitutes the natural recom- 
pense or wages of labor. " l This is a simple, sound theory, but its 
application constitutes one of the most difficult of all employer- 
worker problems; it gives rise to innumerable labor disputes and is 
intimately related to the great social problem of an equitable dis- 
tribution of wealth. Were it possible to devise a simple but definite 
formula lor determining precisely what each worker produced, 
and then to insure that he would receive the equivalent of all of his 
production, many of our economic ills would disappear. 

From the point of view of the employer, wages are important 
chiefly because of their relation to good will and efficiency. If 
wages are adequate and the time and method of payment are satis- 
factory, considerable progress is made toward amicable industrial 
relations and the encouragement of efficient production. In the 
absence of a satisfactory wage scale, no amount of benevolent pater- 
nalism functioning through an imposing array of welfare activities 
will suffice to make employees contented and efficient. This is not 
meant to imply that an acceptable wage scale is per se a guaranty 
of productivity and cooperation, although there is experiential 
basis for the belief that this tends invariably to be so. 

For the worker, wages are of primary importance on account of 
their necessary and intimate relation to his whole standard of living. 
Because he normally has no surplus funds upon which to draw, the 
contents of the pay envelope and the purchasing power of his income 
in terms of commodities and services are of vital concern to him. 
Upon his real income will depend his ability to provide adequate 
and proper food, clothing, and shelter for himself and his dependents. 
Upon it, too, will depend not only his ability to provide for his 
family a reasonable and desirable measure of additional comforts 

1 Vol. 1, Chap. VIII. 

332 



WAGES AND WAGE SYSTEMS 333 

and some luxuries, but also his ability to accumulate a modest 
surplus for the almost inevitable} "rainy days" of sickness, accident, 
unemployment, old age, and death. There is statistical evidence? 
aplenty in proof of the causal relation between income, on the one 
hand, and health, longevity, economic efficiency, and social status, 
on the other. 1 

The community's chief interest in wages develops from those two 
other points of viow. The community of consumers is vitally con- 
cerned when increasing wages are paid out of its own pockets, as 
they are likely to be in the absence of increased labor or technical 
efficiency. Moreover, society in general must always concern itself 
with the effects of low wages on the health, longevity, birth rate, 
morality, and efficiency of its constituent members. 

Definitions and Methods of Procedure. Wages, that is, money 
wages, refer to the dollar income received by the worker for his 
labor during a specified period of time. Real wages are 1 more import- 
ant to him, because they consist of what money wages will buy. 
The wage rate, is the amount of money paid for a specified period of 
labor time or for a specified volume of productivity. Salaries are 
wages contracted and paid to white-collar, or supposedly higher 
grade, employees for relatively longer periods of time, and an; 
always based directly upon time rather than actual productivity. 
Rate setting is the establishment of systematic standard wage rates 
to be received by a worker for accomplishing a given objective! 
determined by careful job analysis, specification, and standardiza- 
tion. Rate setting is divided into four activities: the scientific? 
classification and specification of the job or position; the sotting of 
standards through job standardization, and time and motion ana-ly- 
sis; the establishment of standard wage rates on the basis of thcso 
standards; and the computation of rates according to the standards 
established. 

It is not difficult to imagine how important these practices arc 
to both employer and employee. Competition between enterprises 
is often very keen. In such cases, labor costs, along with other 
costs, must be equalized unless new ways of reducing overhead are 
found. ) Within any organization, employees are likely to discover 

1 For a summary of some of these data, see G. S. Watkins, Labor Problems, 
Chap. IX; P. H. Douglas, C. N. Hitchcock, and W. E. Atkins, The Worker 
in Modern Economic Society, pp. 317319; and California Medical Association, 
California Medical Economic Survey, November, 1937. The last publication 
presents a comprehensive picture of the relationship between income and 
medical care. 



334 THE MAINTENANCE OF PERSONNEL 

instances of inconsistency and disparity in wage rates paid for the 
same or similar work. Morale is soon weakened and efficiency 
decreased unless equalization is made. Furthermore, no system- 
atic plan for hiring or promotion can possibly succeed if scientific 
rate setting and salary standardization are not followed. Every 
wise employer fully recognizes how important this policy is in the 
maintenance of harmonious labor relations. 

Methods of Wage Payment. In industry, as in most other 
forms of organization, one finds constant experimentation with 
concrete schemes designed to achieve what is believed by employers 
to constitute desirable standards of efficiency and justice. f"TLe 
chief practical interest in any method of remuneration, at lea>st from 
the standpoint of the employer, is the manner in which employees 
react to it. Both for the employer and for the worker, wages are a 
means to an end rather than an end in themselves. To the former, 
the criterion of successful wage standards is their influence upon 
the quantity and quality of output and the workers' loyalty; to the 
latter, the test of acceptable wage standards is their adequacy to 
provide for the maintenance of a desirable standard of living. The 
real problem of wages is the coordination and effective realization 
of both of those objectives, and the method of wage payment must 
be calculated to accomplish these ends. 

Numerous wage-payment plans have been devised, but, in gen- 
eral, wages are paid upon a time basis, upon volume of output, 
or some combination of these two methods. Wage plans and 
financial incentive systems may be roughly classified as follows: 

1. Straight time and salary schemes, under which the employer assumes all 
the gain or loss due to variation in output. Payments by the hour, day, week, 
month, or year, or any multiples of straight time payment are the most common 
types of time wage-payment plans. 

2. Piece-rate schemes, under which wage payments are made according to 
the quantity or volume produced. Under this system the employee, rather than 
the employer, assumes all the gain or loss due to changes in amounts produced. 
There are many varieties of piece-rate schemes, among the most important of 
which are the ordinary piece and straight commission rate, and the Taylor, 
Merrick, Gantt, and Haynes-Maiiit wage plans. 

3. Wage-payment plans representing a combination of time and piece-rate 
schemes where gain above a guaranteed daily wage is shared in some degree 
between the employer and employee. In this division the Halsey, Barth, 
Rowan, and Bedaux plans are most widely known. 

4. Wage-payment plans under which an arbitrary point within certain 
limits has been chosen as the basis of wage determination. Most important 
within this group are the Emerson efficiency bonus, Bigelow bonus, and the 
Parkhurst differential bonus plans. 



WAGES AND WAGE SYSTEMS 



335 



Inasmuch as the more important individual systems will be dis- 
cussed in detail later, only the broader classifications need be dealt 
with here. Our immediate concern is with the general schemes of 
wage and salary payments which are the customary methods of 
remuneration and which include the time wage, the piece wage, 
general profit-sharing plans, and the sliding scale. Fundamental 
questions relating to salary standardization and wage administra- 
tion will then receive our attention. An analysis of detailed wage 
plans is presented in the following chapter. 

Time Wages.- The term "time wage" is usually applied to that 
method of remuneration under which the worker is paid a specified 
amount for a definite number of hours of his time. The rate of 
wages may be calculated by the hour, the day, or the week; or, it 
may be based upon a month or year. When the worker extends his 
labor beyond the limits of the normal period and works "overtime," 
he is usually paid an additional sum at the same rate or at an 
increased rate, such as time and one-half or some other multiple of 
the straight-time rate, unless he is receiving a salary. For holidays 
and Sundays, it is not an infrequent practice to pay the wage worker 
double time, although this is more common in times of great emer- 
gency than in periods of normal activity. 

A comparison of the results of studies relating to the number of 
employees paid on time wages with those employed on extra 
financial incentives indicates that until quite recently there has 
been a general trend toward the substitution of financial incentives 
for time-wage systems. Data obtained from representative manu- 
facturers of all sizes and types operating in and around the Chicago 
manufacturing district in 1922 and in 1932 are presented in the 
accompanying table. In view of the absence of more adequate 



TABLE 8. CHANGE IN THE DISTRIBUTION OF WAGE PLANS AMONG 

REPRESENTATIVE MANUFACTURERS IN THE VICINITY OF CHICAGO, 

1922 AND 1932 



Type of plan 


Employees 


Percentage of 
whole 


1922 


1932 


1922 


1932 


Time wages 


15,630 
13,600 


44,674 
107,489 


53.5 
46.5 


29.4 
70.6 


Extra-financial incentive 


Total 


29,230 


152,163 


100.0 


100.0 





SOUBCE: Adapted from Coat and Production Handbook, 1934 ed., p. 615. 



336 



THE MAINTENANCE OF PERSONNEL 



statistical data, it is difficult to say how far this movement has 
developed in the years following the great depression. It is inter- 
esting to note, however, that in several recent labor , disputes, 
notably the Chrysler Corporation strike of 1937, one of the impor- 
tant demands won by the employees was that piece-rate systems be 
replaced by straight hourly wages. There is very little reason for 
believing that any significant swing away from piece-rate and 
bonus systems will take place in American industry in the near 
future, although changing trends may continue to be important 
within specific industries. 1 Differences in wage-payment practice 
for individual representative Chicago industries covered in the 
1932 survey are indicated in Table 9. 

TABLE 9. DISTRIBUTION OF WORKERS COVERED BY WAGE-PAYMENT PLANS 
AMONG REPRESENTATIVE CHICAGO COMPANIES, 1932 



Industry 


Number of employees 
in per cent 


On time 
wages 


On extra-financial 
incentives 


Meat packing 


34 
97 
35 
50 
14 
16 
29 
33 
75 
73 


66 
3 
65 
50 
86 
84 
71 
67 
25 
27 


Food products . . 


Candy 


Tin cans 


Electrical products 


Precision equipment 


Steel and iron foundries 


Heavy equipment 


Clothing and shoes . ... 


Printing 





SOURCE: Adapted from Cost and Production Handbook, 1934 ed., p. 615. 

More recent studies made by the Department of Labor substanti- 
ate the general pattern suggested by these data. In a survey of 
wage-payment practices of representative manufacturers, the 
largest proportion of workers on straight time was found in the 
automotive industry, and the largest proportion on individual 
piece rates was in the clothing industry. 2 Of the 631 manufacturing 
plants included in this study, only J29, or 20 per cent, reported 

1 Compare MORROW, L. C., "How 133 Plants Look at Wage Incentives," 
Factory Management and Maintenance, vol. 95, no. 10, October, 1937, pp. 75-77. 

2 United States Bureau of Labor Statistics, "Wage Payment Practices of 
Representative Manufacturers," Monthly Labor Review, vol. 41, September, 
1935, pp. 697-700. 



WAGES AND WAGE SYSTEMS 337 

material changes in their methods of wage payment from 1929 to 
1935. Another study shows that premium and bonus plans are 
most popular in medium-sized plants. 1 In plants having from 
250 to 1,000 employees, 23 per cent of the workers were under 
premium or bonus plans; in plants of from 1,000 to 5,000, 24 per 
cent were so classified; whereas 14 per cent of those in smaller 
plants and 20 per cent of those in larger plants were so covered. 
The National Industrial Conference Board estimates that in 1935 
approximately 51 per cent of the employees in manufacturing 
industries were under time-wage systems. 2 Other recent studies 
also indicate definite trends toward wage incentive systems. 3 
Despite these data, however, time-wage and salary payments are 
almost universal in practically all fields outside of manufacturing 
and selling. 

Time wages are essentially different in principle from other 
wage systems. In the payment of time wages, no conscious daily 
check up is made upon the production maintained; in fact, in most 
cases of time payments such a check up is impossible. Usually 
general occupational classifications are drawn up. An office 
employee doing a certain type of clerical work will receive one 
time-wage rate, or weekly or monthly salary, and will be advanced 
in salary according to a schedule determined by such factors as an 
estimate of the worker's general production capacities and length 
of service. Within each wage or salary group, the hourly, weekly, 
or monthly rate remains invariable until a new classification can be 
attained. No definite and direct relationship exists between 
wages and production. The employer takes all the responsibility 
for the employee's productivity; he, not the worker, shares in the 
gain of competency or the loss of incompetency until a new classifica- 
tion is made. 

Evaluation of the Time-wage Principle. The time wage offers 
some advantages to both employer and employee. The great 
appeal of the day-rate system to the worker lies in the considerable 
measure of certainty and security which it provides. He knows 
exactly what income he will receive for the time he puts in. All 

1 " Bonus Plans on the Increase," Factory Management and Maintenance, 
vol. 93, August, 1935, p. 327. 

2 National Industrial Conference Board, Study of Financial Incentives (1935). 

3 See Factory and Industrial Management, vol. 80, March, 1931, pp. 411-413; 
vol. 75, March, 1928, pp. 556-557; vol. 80, September, 1930, pp. 527-528; and 
Society of Industrial Engineers, "Trends in Industry," Report of the Proceeding* 
of the 15th National Convention, 1929, pp. 34-54. 



338 THE MAINTENANCE OF PERSONNEL 

responsibility for supervision and output are placed upon the 
shoulders of the employer. The employer who finds it impossible 
to supervise all the work delegates this function to supervisors, 
departmental chiefs, foremen, and subbosses, upon whose coopera- 
tion he must rely for the achievement of quality a*nd quantity 
output. So long as he maintains a satisfactory standard of effi- 
ciency, the laborer need not fear discharge. Within certain limits, 
except in operating a timed machine at work along a set-speed 
conveyor assembly line, or under an excessively rigid system of 
discipline and supervision, he can control the pace of production 
and "nurse" the job. There is no question that the average work- 
man favors the day-rate system for these reasons. Trade unions 
favor it because it makes easy and possible the maintenance of the 
standard rate which they set in joint negotiations with the employer. 
Effective collective bargaining would be difficult, if not impossible, 
should any member of the union be free at any time to accept a 
wage below the established standard. This would reintroduce the 
competitive element against which unions are organized. Although 
it must be remembered that labor organizations seek merely to 
obtain the full competitive rate and do not prevent the employer 
from paying to the exceptional worker rates above the standard, it 
cannot be denied that frequently substandard workers gain entrance 
into unions and receive higher wages than their efficiency would 
justly allow. 

To the exceptional worker, no such advantages accrue. Under 
the day-wage system, no distinction is ordinarily made between the 
proficient workman who turns out a good day's work, whether 
measured in terms of quality or quantity, and the inefficient, lazy 
individual who consciously aims to do just enough work to avoid 
discharge. This situation doubtless tends to have an unfavorable 
reaction upon the whole group. Because it provides no direct 
stimulus to efficiency, other than the chance of promotion, a possible 
advance in wage rates, and foar of discharge, the time-rate system 
encourages an attitude of indifference and passiveness. Even the 
exceptional workman tends to adjust his pace to that of the ordinary 
and inefficient ones. 

From the standpoint of the employer, it is a debatable question 
whether the advantages and disadvantages of the time-rate system 
balance each other. Such a plan of payment tends to improve the 
quality of workmanship and the output. The worker is not rushed 
or speeded up so much as under other systems, so that there is 
ample opportunity for self-expression and creative workmanship in 



WAGES AND WAGE SYSTEMS 339 

those occupations that have not come under the dulling regime of 
minute specialization and monotonous, repetitious tasks. In 
refutation of this contention, of course, it may be argued that under 
the newer wage systems effective supervision and proper incentives 
assure quality of workmanship without the necessity of a time rate. 

The day-wage plan is doubtless simple and easy to apply. No 
difficult mathematical determinations of base and bonus rates are 
involved and job analysis is not imperative. The worker can calcu- 
late his earnings without the danger of misunderstanding. It is 
easy to make up the payroll on the basis of general occupational 
classification and the attendance records. Time-wage payment 
is the only possible system adaptable to work which is of such a 
miscellaneous character as to make standardization impossible. 

On the other hand, the day-wage or monthly salary system has 
conspicuous disadvantages for the employer. Since it contains no 
inherent incentive to efficient work, the employer must provide 
adequate supervision in order to maintain desirable standards of 
efficiency. This enhances the cost of production. Where the 
plant is unionized, the standard day rate generally implies con- 
formity to the standard rate set jointly by management and the 
representatives of the union. This may involve definite restrictions 
upon the employer's right to bargain freely with each worker, and, 
in unreasonable cases, it prevents the discharge of incompetent 
workers. Such a situation implies deficiencies in methods of col- 
lective bargaining, which are being remedied by intelligent unions, 
rather than any inherent weakness in the day-wage method of 
payment. 

Still another disadvantage from the point of view of the employer 
is the uncertainty of costs under the time-rate system. There is no 
question that under this plan of remuneration output varies greatly 
from employee to employee and from day to day. There are 
definite limits to the management's power in driving the working 
force. All this means that wages constitute a variable item in the 
cost of production, making it difficult to predetermine costs and 
fix future selling prices over any considerable length of time. 

The most serious charge made against time-wage and salary- 
payment plans is that they offer no real incentive to maximum 
effort on the part of the worker; hence, they lead to lower individual 
production and considerable economic and social waste. This 
charge is made under the assumption that individuals are inclined 
to do only the minimum they are compelled to do, or feel compelled 
to do. Unfortunately, this is often the case in every type of employ- 



340 THE MAINTENANCE OF PERSONNEL 

ment activity; in so far as it is true, the criticism is a valid one. 
There are, however, numerous forces which lead individuals to put 
forth their best effort even though they may know that at the end 
of the day or the week their paychecks will be no larger as a result 
of increased productivity. Where there is a keen sense of pride in 
workmanship, a conscious desire to do one's best, a competitive 
spirit to excel, a feeling of satisfaction at having done well in one's 
work, or the thought of material gains through future promotion, 
time wage payment may prove to be an effective spur to produc- 
tivity. In such cases many of the ordinary weaknesses of the time- 
wage system are counterbalanced. 

Piece-rate Schemes : Ordinary Plan. The straight piece wage 
is the oldest of the efficiency wage plans and ranks second to the 
day-wage system in point of time of application. In principle, it 
is quite contrary to that of time-wage payments. Under this 
system, the employee shares in his increased or decreased produc- 
tivity, because a price is determined for a given operation or unit 
of product, and that rate is paid regardless of the period of time 
consumed in the completion of the task. Thus, with a large output 
goes a large reward; a small output is accompanied by a small 
reward. When an organization has substituted the piece-rate 
plan for the time-rate plan, it has been customary to determine 
piece rates on the basis of the day-wage standards in operation 
previous to the change in method of payment. Consequently, the 
piece rates have been set at a point which would yield approxi- 
mately the same income for the same performance, the chief gain 
to the employer accruing from the speeding up or the elimination of 
substandard workers who under the day-wage plan are paid out of 
proportion to their output. In some instances, an attempt has 
been made to fix the piece rate at what is considered a "fair" or 
"just" level for standard performance. The determination of 
such levels has usually been based upon the performance of one or 
more workers selected for the purpose. Human judgment as to 
what constitutes a reasonable time and a reasonable rate enters 
largely into the calculations of piece rates under this system. 

Under the piece-rate system, the necessity for close and efficient 
managerial supervision is considerably lessened, since the worker 
must now assume responsibility for the economical and effective 
use of his time. Whatever reduces the period of time required 
for the worker's completion of the set task (whether it be his own 
faster pace and improved efficiency or technical improvements 
introduced by the employer) invariably tends to increase his output 



WAGES AND WAGE SYSTEMS 341 

and earnings. Should the workman consciously slow down his 
pace or become indifferent to his efficiency, his production will be 
automatically reduced because of the greater amount of time 
required for the completion of the task. All of this tends to result 
in the assumption of supervisory functions by the workers and in the 
stimulation of their interest in the technical problems of manage- 
ment. Adequate supplies of good raw materials, proper scheduling 
and routing, well-conditioned machinery, improved tools and 
equipment, and similar requisites of efficient production become a 
vital concern to the workers under the piece-rate plan. 

The piece-rate system presents obvious advantages to the worker 
and the employer. In contradistinction to the time-rate plan, the 
superior ability and performance of the exceptional workman are 
recognized and compensated in definite financial returns. The 
piece-rate system provides an incentive to output and places a 
check upon soldiering. The fast, efficient workman forges ahead 
of his fellows and in doing so raises the general standard of output 
and earnings. Moreover, a creative interest in the job and a 
constructive interest in the problems of management result, thus 
eliminating some of the tedium and monotony of the daily grind. 
To increase his earnings the worker often studies his job and seeks 
to devise ways and means of facilitating output. In an investiga- 
tion of manufacturing plants made by the National Industrial 
Conference Board it was found that the introduction of piece rate 
systems led to an actual average increase in output of 30 per cent, 
an increase in average earnings of 25 per cent, and a decrease in per 
unit production costs of 21 per cent in the 1,214 plants, employing 
777,376 workers, included in the study. Individual plants reported 
increases in output ranging from 10 to 400 per cent; increased 
earnings ranging between 10 and 199 per cent; and decreased unit 
costs of between 10 and 50 per cent. 1 

The employer finds his advantages in the relaxation and economy 
which come from the shifting of responsibility for production from 
his own shoulders to those of the working force; the certainty of 
labor costs which results from the fixed rate per job or per piece; the 
elimination of substandard workers who find it impossible to main- 
tain efficient output and can no longer hide their deficiencies under 
the efficient efforts of superior and conscientious workmen; the 
lower costs and larger product which normally accrue; the possibil- 
ity of predetermining labor and other production costs and so 
contracting for future deliveries at specified selling prices; and the 

i National Industrial Conference Board. Si/stems of Waae Payments. t>. 37. 



342 THE MAINTENANCE OF PERSONNEL 

reduction in the degree of confusion in organization and daily work 
schedules brought on through absenteeism and tardiness. 

The piece-rate system, however, is not without its marked dis- 
advantages. This system has some tendency to divert the atten- 
tion of management away from improved technique oi production 
and progressive methods of labor management. Relieved of the 
responsibility of close supervision, there is grave danger that 
management will devote less time and energy to the ways and means 
of improving the details of organization and operation, and disregard 
possible improvements in human administration which are not 
obtainable or measurable in terms of wages. This danger has 
been accentuated where organized labor has opposed a cut in the 
piece rates, even when the greater output was the result of technical 
changes rather than of increased effort on the part of the workers. 
It has been stated that "Under average conditions, with piece-work, 
about 88 per cent of the benefit of all improvements affecting the 
rate of production accrues to labor, and 12 per cent to manage- 
ment." 1 The piece-rate system, moreover, tends to encourage 
the conviction among the workers that they have a vested interest 
in established rates, regardless of revisions made necessary by 
technical improvements. 

The greatest deficiency of the piece-rate system, from the point 
of view of the workers, is the tendency of management to cut the 
rates upon the least excuse or with no excuse at all, except that the 
employees are making too high wages. The system has frequently 
been abused. Where piece rates have been established and a large 
production has resulted in correspondingly large income for the 
workers, management has often cut the rates because it feared 
the results of allowing the piece-rate wage to depart too far from 
ordinary levels for the same or similar work in other plants. The 
net effect of such a practice is that the workers, especially those 
who bargain collectively, develop a relentless antagonism toward 
any form of piece-rate payment. Those who are operating under 
such a system oppose rate cuts on general principle, even though 
such a revision may justly be warranted by technical changes 
which make increased output possible. The workers argue, not 
without justification, that management is unwilling to pay more 
for large production than for small production, although the larger 
output reduces the overhead charges per unit of product and so 
enhances profits per piece. 

1 JONES, E. D., The Administration of Industrial Enterprises, 1st ed., p. 251. 



WAGES AND WAGE SYSTEMS 343 

This deficiency of the piece-rate method of payment develops 
from the abuse rather than the use of such a system, and can easily 
be eliminated if management so desires. If rates are established, 
they should be guaranteed until the nature of the work, the tools, or 
the materials are changed. The following principles should govern 
rate determinations and revisions: 

1. When greater production is the result of greater application and effort 
and the exercise of greater intelligence on the part of the workers, there should 
be no objection to increased total earnings per man, and rates should not be 
revised. 

2. When increased output and earnings are the effect of technical changes 
introduced by management, such as a change in the ratio of machine work to 
hand work in the operation, there is justification for rate adjustments. 

3. When the income of pieceworkers is extraordinarily high or low com- 
pared with the earnings of other employees who spend the same amount of 
time, energy, skill, and intelligence oil their work, even if the ratio of mechanical 
to human factors remains the same, there is reason for consideration of rate 
revision. In other words, if the earnings under established rates are inadequate 
to maintain a decent standard of living, or if they are so high as to be out of any 
reasonable proportion to the amount of effort, intelligence, or skill involved, 
readjustment in rates is not objectionable. 

4. Original rates should be set and all revisions made by joint committees 
of representatives of management and men cooperating with the rate-setting 
expert. This will create confidence in the plan, promote justice, and preclude 



The piece-rate system offers other disadvantages and limitations. 
It tends to sacrifice quality to quantity of product. The workers 
seek to get out the largest possible number of pieces or to complete 
the task in the shortest possible time, regardless of the quality. 
Depreciation of machinery and equipment tends to be excessively 
rapid because of the abnormal speed and wear and tear. This 
entails high replacement costs. The worker is not assured a 
minimum of earnings, so his insecurity is enhanced; he may not 
receive enough to maintain his customary standard of living, 
especially if rates are arbitrarily manipulated by the employer to 
reduce the earnings of the workman, or if he is a beginner. The 
speeding-up process, which frequently attends piece-rate systems, 
has deleterious effects upon the health of the worker because of 
resultant fatigue and the accumulation of fatigue poisons. Piece 
rates tend to be characterized by a certain degree of inelasticity 
since, when they are once established, it is difficult to change them, 
regardless of variations in the cost of living and in industrial earnings 
caused by alternating periods of business expansion and recession. 



344 THE MAINTENANCE OF PERSONNEL 

Choosing the original rate or the basis of the piece rate offers 
many practical difficulties. Unavoidable delays, over which the 
worker has no control, are often not compensated; the plans are 
often complicated and confusing to the worker; and seldom does 
the piece-rate plan recognize intangible qualities of he worker, 
aside from productivity, which at times can, mean the difference 
between a satisfactory and an unsatisfactory employee. In the 
face of all^bhe limitations, however, it is often possible to adjust 
the piece-rate system to the particular organization either through 
scientific time study or through a minimum-wage guarantee. 
Under these conditions, many of the weaknesses may be overcome 
and the plan may be made to work successfully. 

Guaranteed Straight Time -wage Plan. A significant develop- 
ment in the application of the principle of time pay has been the 
introduction of the guaranteed straight time wage or the guaranteed 
annual salary plan adopted in several leading organizations through- 
out the country. In August, 1923, all employees who had been 
with Procter & Gamble Company for a period of at least 2 years 
were guaranteed a minimum annual income of 48 weeks' work 
with pay. This guarantee plan has more recently been extended 
to cover a period of 50 weeks within the year to all those with a 
record of at least 1 year of service. The employees of the incan- 
descent lamp division of General Electric Corporation were first 
guaranteed 50 weeks of 30 hours work each per year in 1931. The 
plan has been changed to a guarantee of 1 ; 500 hours, in order to 
allow for greater flexibility. 1 The Hormel Packing Company 
placed part of its employees on a definite pay-check basis in 1933, 
under which employees received a weekly check regardless of the 
number of hours worked. 2 By 1935, about, 1,436 out of 2,400 in 
one plant were under this wage-guarantee plan, and by the end of 
1936 approximately 56 per cent of the employees were on guaranteed 
straight time. 3 

The income of employees of the Patterson Manufacturing Com- 
pany of Dennison, Ohio, is averaged over 52 weeks each year. This 
amount is paid weekly even though work is not being done. 4 The 
Nunn-Bush Shoe Company employees are guaranteed 52 paychecks 
each year, the amount per week being determined by the average 

1 BALDERSTON, C. C., Executive Guidance of Industrial Relations, p. 87. 

2 Factory Management and Maintenance, vol. 93, August, 1935, pp. 323-325. 
8 Ibid., vol. 94, December, 1936, pp. 43-44; and The Literary Digest, Dec. 25, 

1937, pp. 14-15. 

4 " Fifty- two Payment Plan Smooths Seasonal Employment," Factory 
Management and Maintenance, vol. 95, July, 1937, p. 124. 



WAGES AND WAGE SYSTEMS 



345 



previous earnings over 48 weeks. Under this plan actual employ- 
ment in excess of 48 weeks during any year is paid for as extra time, 
the guarantee covering 1,920 hours per year. 1 Obviously, such plans 
are not needed in most service industries where commodity produc- 
tion is not the major activity, but the application of this simple 
guarantee method offers real possibilities to millions of employees 
in thousands of organizations such as retail merchandising firms, 
offices, and manufacturing companies. 

Group Time or Bonus System. Under certain conditions, it is 
wise to offer wages to groups of between five and fifty workers instead 
of individually. Under this plan a standard task is usually set by 
careful time-study analysis. The standard task is then multiplied 
by the number of workers in the group, and the group task becomes 
standard. All production by various members of the group is 
pooled, and wage payments in the form of bonuses are prorated to 
the members upon a basis of the actual production in excess of the 
standard. Sometimes, as in the case of the Westinghouse Electric 
and Manufacturing Company, the total group earnings are divided 
among the members in proportion to the time and base rate of each 
individual. 2 Suppose, for instance, that a five-man group is made 
up of A, , C, D, and E, and that a two-week pay period of 75 hours 
has been established. If A and B have worked 75 hours, C, 60 
hours, D, 55 hours, and E, 65 hours, the total man-hours of the group 
would be 330. If, under these conditions, it is assumed that the 
total standard time allowed for the work of this group is 445 hours, 
then the group efficiency would be computed as 445 divided by 330 
or 135 per cent. Under the assumption that the rates of the men 
are those indicated below, then earnings within the group would be : 



Man 


Day-work rate per 
hour, cents 


Standard time 
rate per hour, cents 


Individual earnings 


A 


54 


60 


75 X 135% X60 = $60.68 


B 


45 


50 


75 X 135% X 50# = 50.57 


C 


40 


45 


60 X 135% X45?f = 36.41 


D 


45 


50 


55 X 135% X 55# = 37.08 


E 


54 


60 


65 X 135% X 60j = 52.59 



A somewhat similar system has been used in the tool room of the 
Graham Paige Motors Corporation since 1923. In this company 

1 Factory Management and Maintenance, vol. 93, August, 1935, pp. 331-332. 

2 Westinghouse Electrical and Manufacturing Company, "Wage Adminis- 
tration," Industrial Relations Manual, April, 1935. 



346 THE MAINTENANCE OF PERSONNEL 

guaranteed day rates are paid when actual production time falls 
below that established as the standard group task. 1 Another group 
plan quite similar to this has been used by the Western Electric 
Company. 2 In 1924, the National Cash Register Company adopted 
a group-payment plan whereby standards were expressed in decimal 
hours per 100 units. Performance of the average worker was taken 
to be 75 per cent efficient." Above this point, a 1 per cent bonus 
was paid for each 1 per cent increase, and the efficiency was computed 
as the ratio of group output to input in hours. 3 The plan was later 
modified but in principle has remained the same. This company 
experienced a reduction in the cost of direct labor of between 25 and 
50 per cent when the day-wage system was abandoned. 

Many other variations of the group-bonus system are in use 
today, notably among such companies as Chrysler Motors Corpora- 
tion, Goodyear Tire and Rubber Company, and other industrial 
organizations. A group plan known as "cooperative production" 
has met with success in England. 4 Under this plan, a standard 
period is taken and the production at the end of every 4 weeks is 
compared with the standard production. Output is reduced to 
the equivalent of points, and its value must exceed the standard 
number of points if the workers are to receive a group bonus. 
Every employee in the organization receives his prorated share of 
the bonus depending upon the amount of the regular wage, and 
payment is independent of the company's earnings. In the appli- 
cation of this scheme, a list is made of all commodities manufac- 
tured during a specified period (preferably 2 years). These are 
then classified to determine the labor value of each class, so that 
the time spent in production can be reduced to a skilled man-hour 
basis. Each article is then assigned a point value depending upon 
the number of man-hours it represents and the number of these 
points above the standard over specified periods of time detf rmines 
the size of the bonus distributed. 

Group bonuses find little applicability outside of manufacturing 
organizations. Here, however, numerous instances of increased 
production and greater efficiency could be cited. Doubtless their 
strongest field of application is in the type of industry where speciali- 

1 Factory Management and Maintenance, vol. 95, July, 1937, pp. 65-66. 

2 Manufacturing Industries, vol. 16, August, 1928, pp. 273-278. 

9 American Management Association, Production Executives' Series 73, pp. 
7-18. 

4 United States Bureau of Labor Statistics, Monthly Labor Review, vol. 26, 
March, 1928, pp. 500-604. 



WAGES AND WAGE SYSTEMS 347 

zation methods allow the use of the conveyor belt; where minute 
division of labor requires expert skill; where the presence of over- 
head costs is instrumental in reducing the expense of individual 
record keeping or where greater flexibility in the incentive is sought. 
Often it is possible to secure increased effort through group action 
where individual incentive might retard efficiency because of the 
fear of time study and rate cutting. Under a group-bonus system, 
a change in the wage scale can be made by simple adjustments in 
the base rates of any of the employees desired without influencing 
the wages of others. Group systems further reduce supervision 
needs; create close cooperation among group members; simplify 
time-study, time-keeping, and cost-accounting work; lead to better 
quality with less inspection; and, in general, make for better working 
conditions and an opportunity for increased earnings. 

Profit Sharing. When an employer gives his employees a share 
in the net earnings of the enterprise in addition to their regular wage, 
a profit-sharing plan is being applied. According to the fundamen- 
tal principles of pure profit sharing, the amounts to be distributed 
among the participants should come principally from the net earn- 
ings of the enterprise, the proportion or percentage of the earnings 
to be apportioned to each employee should be designated in advance, 
and the benefits of the scheme should be accorded to at least one- 
third of the regular wage-earning or salaried employees. 

Profit sharing as a method of industrial remuneration is among 
the oldest attempts to depart from the ordinary wage systems or to 
supplement them, going back as far as 1829 in Great Britain, 1842 
in France, and 1886 in the United States, 1 the countries in which 
it has had the widest application. Sharing profits with employees 
has been inaugurated by employers in the hope of achieving one or 
more of several purposes. These include the promotion of indus- 
trial efficiency; the cultivation of peaceful relations; the encourage- 
ment of economy in the use of materials, machinery, and equipment ; 
the development of industrial responsibility on the part of wage- 
earning groups; and the promotion of loyalty to the job and the 
enterprise. In some cases, other ends have been desired. Some 
companies have found such schemes a valuable aid to effective adver- 
tising and publicity. Others have consciously used them to counter- 
act the influence of organized labor and to prevent the introduction 

1 The N. O. Nelson Company of St. Louis. This plan has been in operation 
without interruption for 51 years. For a short history of the development of 
profit sharing in the United States, see particularly National Industrial Con- 
ference Board, Profit Sharing, 1935, p. 3. 



348 THE MAINTENANCE OF PERSONNEL 

of collective bargaining. Still others have discovered in profit 
sharing one way of assuring a measure of economic and social justice. 

There are normally five ways of distributing profits among 
employees under profit-sharing plans. Profit sharing may be 
experienced by means of the sharing of the net profit of the enter- 
prise in regular cash distributions or arbitrary informal bonuses; 
participation in a special welfare or pension fund established out of 
company profits; distribution of stock; departmental gain sharing; 
and unit-profit sharing. Only the first three methods are important 
enough to warrant consideration here. 

Net earnings may be distributed in the form of cash payments 
at the end of a specified period. Sometimes this policy is publicly 
announced among employees, as in the case of the White King Soap 
Company, where, for years, it has been the practice to distribute, at 
the end of the year, checks ranging between $100 and $300 per 
worker, depending upon the profits of the company. More often, 
however, such action is announced voluntarily toward the end of 
the year as a surprise to the workers. The Allis Chalmers Manu- 
facturing Company announced that each member of the work 
force employed on hourly, piece-work, and standard-time basis 
was to receive on Dec. 23, 1936, a bonus of 3 per cent on earnings 
for all full-pay periods during the last 10 months of the year. 1 In 
February, 1935, the Chrysler Corporation announced a fund of 
$2,300,000 had been set aside out of earnings to distribute among 
employees on the company's payroll during the first 3 months of 
1935. A minimum of $30, plus $2 extra for every year of service 
up to 16 years, was allowed, and plans for future profit sharing were 
announced. 2 The Eastman Kodak Company has extended cash 
profit-sharing bonuses to all employees working during a part of at 
least 26 weeks during the year, 3 while the Endicott Johnson Shoe 
Company has followed the policy of splitting net profits after taxes 
and dividends with the employees whenever earnings are sufficient. 4 
During the 10-year period ending in 1928, over $13,000,000 were 
thus distributed. Employees of the Kansas City Public Service 
Company for years shared quarterly in the profits of their organiza- 
tion but more recently have voted to buy bonds of the company 
rather than to receive cash payments. 6 

1 Management Review, vol. 25, November, 1936, pp. 349-351. 

2 Ibid. 

3 Ibid.; also Factory Management and Maintenance Supplement, vol. 95, 
February, 1937, pp. 367-368. 

4 National Industrial Conference Board, Memorandum 52, Oct. 1, 1936. 

* United States Bureau of Labor Statistics, Monthly Labor Renew, vol. 32, 
May, 1931, pp. 1069-1070. 



WAGES AND WAGE SYSTEMS 349 

In practically every country, actual cash disbursements have 
proved the most acceptable and successful of all the methods, 
because the workers much prefer to receive their supplementary 
income at frequent intervals, such as at every quarter or every 6 
months. Annual payments are less popular because realization on 
his efforts seems remote to the worker. The scheme is thus deprived 
of its incentive value and so defeats its primary purpose, which 
usually is to increase output. The principal objection to cash pay- 
ments is that the employer has no assurance that the additional 
income is being used wisely. The cash bonus has been rather suc- 
cessfully applied in Great Britain, where at least two-thirds of the 
plans operate on this basis, but in the United States cash payments 
appear to have been less satisfactory than any of the various forms 
of stock distribution. 

The distribution of profits may be made under a deferred plan, 
in which case the profits to be divided are placed in a savings account, 
annuity fund, pension fund, or other account to be drawn upon at 
some future date. The worker's share in profits thus remains in 
the capital of the enterprise and draws interest. He may obtain 
his accumulated savings upon attaining a certain age, after a cer- 
tain period of service with the company, or in the case of a serious 
emergency. On the other hand, if he is dishonorably discharged 
or goes out on strike, he may be denied participation in the accumu- 
lated fund. In some cases, separation from the service of the com- 
pany because of illness or for some other good reason does not deprive 
a man of his share. This method of profit sharing, which has met 
with considerable success in France, has not appealed so generally 
to American wage earners. The plan has not provided the incen- 
tive to efficiency and good will which was expected of it, largely 
because of the feature of indefinite postponement. 

Participation in profits quite commonly takes the form of stock 
distribution. Some corporations make distribution of stock in 
recognition of superior service over a certain period of years; 
others make it possible for their workers to purchase the shares of 
the company on the installment plan at a price somewhat below 
the market quotation, the payments being made by either full or 
partial deductions from the employee's wage. Sears, Roebuck and 
Co., for example, has a voluntary profit sharing plan making pos- 
sible stock purchase which has been taken advantage of by some 
95 per cent of the employees. 1 Under this scheme the worker is 
eligible after 3 years of service, at which time 5 per cent of his wages 

1 FKAILBY, L. E., "A Profit Sharing Plan That Works," American Business, 
vol. 7, May, 1937, pp. 15-6. 



350 THE MAINTENANCE OF PERSONNEL 

are deducted and matched with another 5 per cent from the profits 
of the company. This is invested in company stock, and dividends 
may be used to buy more stock. During 1936, the company con- 
tributed $1,699,647 under the plan. Withdrawals are permitted 
after 10 years of service (5 years for women getting ntarried), but 
they can be made prior to this time, in which case the employee 
receives his own investment plus 5 per cent compounded interest. 
This is only typical of various similar plans available to thousands 
of employees in practically every line of industrial activity. Here, 
it will be noted, profit-sharing schemes continue to be applicable 
only to profit-making organizations. 

Under both of these conditions the number of shares apportioned 
to each worker is definitely limited and determined usually on the 
basis of earnings. Such stock may or may not carry voting rights, 
and is often not transferable except to fellow employees or to the 
company. This form of profit sharing is rather common and suc- 
cessful in the United States, although the number of eligible 
employees who take advantage of the opportunity to purchase 
stock is not nearly so large as might be expected. There has been 
some danger of overcapitalization on account of stock distribution 
to employees. Moreover, it has been difficult to educate the work- 
ers to the necessity and wisdom of retaining their stock. 

The amount of additional income distributed among employees 
under profit-sharing plans varies with different companies. It 
consists usually of a certain percentage of the net earnings for the 
year preceding the date of distribution, although in some cases 
division takes place quarterly or semiaiinually. As a rule, the 
amount assigned to each worker is in direct proportion to his annual 
earnings, exclusive of overtime and piecework income. In the 
United States, the share has averaged between 10 and 12 per cent 
of annual wages. 

Eligibility to participation in the profit-sharing plan usually 
rests upon a good service record with the company for a certain 
period ranging from 1 month to 5 years or more. 1 Occasionally 
provision is made for a reduced bonus to employees who have been 
with the firm for a short period. In many companies, participa- 
tion is denied certain classes of employees, such as those below a 
specified age, those receiving a high wage or salary, or those work- 
ing on a commission basis. Membership in a trade union has 
sometimes been a basis of disqualification, although in some English 

1 United States Bureau of Labor Statistics, "Sharing Profits with. Employ- 
ees," Monthly Labor Review, vol. 30, March, 1930, p. 585. 



WAGES AND WAGE SYSTEMS 351 

plans union membership is compulsory. The company usually 
reserves the right to deny participation to employees who have 
been disciplined for infraction of shop rules, inefficiency, habitual 
tardiness or absence, or any other deficiency. 

The experience of industry in the United States and abroad is 
not reassuring with regard to the efficacy of profit-sharing plans as 
an incentive to efficiency and good will. While there have been 
notable examples of the excellence and practicability of such 
schemes, the mortality rate has been excessively high. Many 
corporations have abandoned their plans either because the results 
did not justify the financial outlay or because the employees did not 
react favorably to them. Other causes of failure have been the 
opposition of trade unions, the tendency of workers to become 
indifferent to the scheme after the novelty has worn off, the fact 
that wage earners cannot and do not want to become risk takers, 
and their tendency to look upon bonuses as a vested right regardless 
of cooperation in the task of production. Unions prefer that 
profits be shared in the form of fixed wages. They fear the adverse 
influence of profit-sharing schemes upon the aggressiveness of 
workers in matters of collective bargaining and strikes. On the 
other hand, many employers oppose profit sharing because it 
involves no responsibility on the part of the employee for losses and 
because the business cycle makes the possibility of payment too 
uncertain to serve as a genuine financial incentive for increased 
productivity. 

Many corporations which have conscientiously applied profit- 
sharing schemes praise them as conducive to reduction in labor 
turnover, improvement in attendance records, decrease in produc- 
tion costs effected through more careful and economical use of 
materials and equipment, increase in general efficiency of the 
organization, encouragement of thrift, and promotion of cordial 
relationships, with resultant industrial peace. Such success, how- 
ever, has always been the consequence of scrupulous attention 
to the basic principles underlying pure profit-sharing plans. In 
every case, success will be contingent upon the following: the pay- 
ment of current wage rates for all classes of labor employed by the 
company; the exact determination in advance of the percentage 
of profits that is to be divided with the workers; joint representa- 
tion of management and men on the administrative committee 
which controls and administers the plan; proper adjustment of the 
scheme to the peculiar conditions existing in the establishment; 
careful education of the employees with regard to the nature and 



352 THE MAINTENANCE OF PERSONNEL 

implications of profit-sharing plans; and the existence of sufficiently 
high net earnings to provide a bonus that will stimulate interest, 
efficiency, and cooperation. When inaugurated and administered 
on this basis, profit sharing will do much to provide added incentive 
to industrial effort and will be an aid to the realization of- economic 
justice. 

The Sliding Scale. Under the sliding-scale method of wage 
payment, wages and salaries are made to rise and fall in proportion 
to the changes in the general level of prices. This method is 
based upon the belief that wages should be determined by either 
the selling price of the product or the general level of prices. Its 
principal application has been in industries, such as coal and metal 
mining, the price of whose products tends to fluctuate considerably. 
It is usually administered under some form of collective agreement 
between trade unions and organizations of employers in a given 
industry. It is customary to set a standard basic rate for the unit 
of product, as a ton of coal, and to provide that, at stated intervals, 
usually every 6 months or a year, wages shall be revised according 
to readjustments in the selling price. Thus, if the miner is being 
paid a standard rate of $2 a ton for coal when the market price is $3 
and by the end of the revision period the selling price has advanced 
to $4, his wage will be increased by a certain percentage specified 
in the trade agreement, say 50 per cent of the increased selling 
increment, or 50 cents a ton. A similar readjustment is made if 
the market price falls by the end of the revision period. The 
relative percentage of the increase or decrease that shall go to 
wages and profits is ordinarily determined on a basis that will 
assure adherence to and fulfillment of the contract by both employ- 
ers and trade unions. 

The plan has received its widest application in Great Britain, 
especially in coal and metal mining. Growing opposition of trade 
unions, which now insist more upon a minimum living wage, has 
resulted in the almost complete abandonment of the sliding scale 
in British industries. In the United States, the plan has been 
adopted in the basic processes of iron and steel manufacturing, but 
it has never enjoyed prominence in this country. Two recently 
announced plans have gained rather wide publicity in the United 
States. On Nov. 15, 1936, a sliding-scale wage plan went into 
operation among employees of the United States Steel Corporation, 
whereby wages are made to vary according to living costs, with the 
period 1923-1925 being taken as a base of 100. New wage rates 
were 10 per cent higher than those previously in effect, thus com- 



WAGES AND WAGE SYSTEMS 353 

pensating for a 10 per cent increase in living costs. No adjustments 
either upward or downward are made until changes reach 5 per cent 
of the former level. 1 In October, 1936, the General Electric 
Company announced a somewhat similar plan except that pay 
increases are to be made up to but not exceeding 10 per cent above 
the wage level and not below the amounts being paid at the time 
the plan became effective. Beyond these limits the plan is 
subject to further modification and acceptance by employer 
and employees. 2 The scheme pertains to the first $3,000 per 
year of all employees receiving earnings not exceeding $4,000 per 
year. 

Any plan attempting to adjust wage rates automatically involves 
considerable difficulty. Especially is this true when wage rates are 
anchored upon the selling price of a product. Organizations of 
employers and employees must be strong enough to enforce decisions 
and have adequate facilities for the collection, tabulation, and 
interpretation of price data. In the absence of such agencies, an 
approximation to fair play and justice is almost impossible. The 
determination of an acceptable base or standard for the normal wage 
and the normal price is not an easy matter. Anything, such as 
cutthroat competition, which tends to interfere with normal price 
levels for the product will magnify this difficulty. Consequently, 
the greater the degree of cooperation among producers, whether 
secured through informal open-price associations or the more formal 
interlocking directorates, the greater the standardization and 
control of prices. Although this may stabilize both wages and 
prices, it also makes possible unscrupulous manipulation of both. 
To adjust wage levels on the basis of price fluctuations for any single 
product is manifestly precarious. It is quite conceivable that the 
price of coal, for instance, may rise at the same time that the general 
level of other commodity prices is falling, or vice versa. Such a 
condition tends to encourage agitation for " illegal'' readjustment. 
Employers do not normally enjoy paying high wages when the 
general level is low, regardless of the justification found in the 
exceptional price level in the case of their particular product. 
Similarly, no group of wage earners passively accepts low wages in 
its own occupation when the general scale for other occupations is 
relatively high. 

i"How Index Figure May Affect Wages/' Steel, vol. 99, Nov. 16, 1936, 
pp. 23-24. 

*" General Electric Adjusts Earnings," Iron Age, vol. 138, Oct. 15, 1936, 
p. 237. 



354 THE MAINTENANCE OF PERSONNEL 

The difficulty of forecasting commodity prices entails possible 
loss for both employers and workers under the sliding-scale arrange- 
ment. The base rate may be set at a fairly low level in anticipation 
of an upward trend in prices which may not take place. In this 
case the workers incur distinct loss and privation, especially if the 
price of their particular product remains low while the general 
level of prices rises, causing a general increase in the cost of living. 
Moreover, individual mills and mines may continue to fill previously 
negotiated contracts at low prices long after the price on the general 
market has advanced, although cancellation of contracts tends to 
counteract this difficulty. Cancellation of contracts, however, is 
not conducive to customers' good will. Customers are more likely 
to cancel contracts than are producers, so that the employer stands 
little chance of making wider margins of profit through high-price 
contracts before a drop in prices. The way out of this difficulty 
is to limit the time during which contracts are allowed to affect 
wage rates and to shorten the period of revision. But frequent 
revision defeats a major purpose of the system, which is to assure 
a measure of security for employers and employees. 

Finally, the sliding scale does not, any more than other methods 
of payment, preclude the necessity of periodical reconsideration and 
readjustment of wage rates. Evolutionary changes in industry, 
such as new or improved processes, machines, equipment, and tools; 
conspicuous changes in the cost of raw materials and equipment; 
seasonal or periodical changes in business conditions with conse- 
quent changes in the labor supply; the emergence of new com- 
petitive factors, such as substitute products and the opening up of 
new competitive areas; and the instability of the price of commodi- 
ties and services which causes variations in the cost of living 
all tend to unsettle the foundations of sliding-scale agreements and 
to compel frequent revision of rates. 

Notwithstanding these difficulties and deficiencies, the sliding- 
scale system possesses some virtues. The determination of wage 
scales for a definite period of time certainly tends to reduce the 
cause and possibility of disputes in the industry in which such 
determination is made. As in the case of piece rates, the sliding 
scale introduced an element of certainty into production costs, thus 
enabling the employer to predetermine approximate costs of oper- 
ation for the period and so to accept long-term contracts. This 
creates a feeling of security which is conspicuously lacking 
where no binding wage agreements are negotiated. There is reason 
to believe, also, that the employer benefits from the fact that the 



WAGES AND WAGE SYSTEMS 355 

sliding scale tends to promote the worker's interest in the necessary 
relation between the price of the product and the wages that can 
be paid in the industry. Both employers and workers find an 
advantage in the elimination of arbitrary and abrupt modifications 
of the wage rates. Here is at least a measure of economic security 
for both. The employer does not have to fear that during the 
tenure of the agreement wage scales will soar to unreasonable 
heights; the worker need not fear that during the same period his 
wage will be spontaneously reduced to levels which do not warrant 
the maintenance of his customary standard of living. 

The recent movement for adjusting wages to the cost of living 
is a tacit recognition of the basic principle which underlies the slid- 
ing scale, and the sliding scale itself is a recognition of the justice of 
sharing profits with the workers. It is doubtful, however, if this 
method of industrial remuneration will receive serious attention 
by a large number of American manufacturers, even in those indus- 
tries, such as coal and steel, to which it might logically be applied, 
unless or until such action is made obligatory by some forms of state 
or federal legislation. 

The Problem of Rate Setting. Individual organizations may 
differ considerably in the type of wage and salary payment plans 
which they use, but all types of organizations religious, profes- 
sional, merchandising, office, sales, civil service, commercial, finan- 
cial, and industrial constantly face the necessity of setting wage 
and salary rates. Usually the wages or salaries paid in a given 
organization are related in a varying degree to the wages paid for 
common labor. 

There are several reasons why wages and salaries may not be 
uniform within any given organization. First, the company may 
be scattered throughout a wide area with branch stores or offices 
located in various parts of the country where market wages and 
living costs vary considerably. Then, there are bound to be many 
irregularities in any wage scale involving a relatively large number 
of employees within an individual company, unless a systematic 
study of wages has been made and wage control centralized. Many 
inconsistencies develop between the same or similar grades of work- 
ers, departments, and even the same grades of workers within 
a single department, unless an effective system of coordination 
and control has been introduced. One writer has stated, "As 
long as such conditions exist some individuals will draw more than 
their share of the pay roll, and others less. It is folly to assume 
that the personnel will not sense these inequalities and react in loss 



356 THE MAINTENANCE OF PERSONNEL 

of faith, confidence, loyalty, and cooperation. A well-balanced 
distribution is vital in the economics of labor relations in every 
organization. " l The urgent need for a scientific approach to this 
problem is suggested by the organization of the Westinghouse 
Electric and Manufacturing Company, with its more than 8,000 
salaried employees in a thousand or more classifications scattered in 
thirteen manufacturing points and ninety-six major centers of 
distribution and service; 2 or by the county governments embracing 
some of our large industrial cities, as for example, the County of Los 
Angeles, with its 18,000 wage and salaried employees falling within 
over 3,500 specifications. 

Salary Standardization. Wage and salary standardization is 
the grading of jobs, and the establishment and maintenance of wage 
limits for each classification of positions. 3 Many organizations 
have applied scientific methods in the determination of wages, but 
only a few have attempted to devise similar techniques for establish- 
ing salaries. As the executive of one company states : 

When an organization becomes as large as this company, the adminis- 
tration of salary and promotion ceases to be the function of a proprietary 
individual and becomes a problem to be handled scientifically, if it is to be 
fair. This means a systematic plan, because salary and promotion are 
the two most vital factors of good personnel management. . . . Every 
employee desires a fair salary and a fair chance of promotion. The con- 
sideration of seniority, influence, and personality should not be major 
influences in the determination of salary increases and promotion, which 
should be based primarily on merit, past performance, and the value of the 
work to the company. Otherwise you have a discouraged and disgruntled 
personnel doing mediocre work. 4 

In view of the recognized need for such action, however, it is 
disappointing to find so few who are seeking a solution of the 
problem. Even where schematic procedures are found, standard- 
ization is limited to positions paying a maximum of $300 per month; 
only rarely are salaries of $5,000 and $6,000 per year included. In a 
comprehensive study of classification and compensation plans for 

1 HOPWOOD, J. O., "Job Analysis and Classification in Payroll Administra- 
tion," Harvard Business Review, vol. 14, January, 1935, p. 152. 

a Westinghouse Electric and Manufacturing Company, "Salaried Employ- 
ment Policy," Industrial Relations Manual, August, 1936. 

8 See Metropolitan Life Insurance Company, Salary Standardization and 
Administration^ 1934, p. 1. 

* Ibid, p. 3. 



WAGES AND WAGE SYSTEMS 357 

library positions, the Bureau of Public Personnel Administration 
reported: 1 

1. That the compensation for positions involving the performance of 
similar duties and the exercise of equal responsibilities and calling for the same 
qualifications showed wide variations and marked inequalities within the same 
libraries, and still wider variations and inequalities between libraries in different 
communities. 

2 . That the general level of compensation for library workers of practically 
all grades was low. 

3. That there were many inequalities in the relative rates of compensation 
for different classes of library workers. 

4. That no comprehensive classification or job analysis of library positions 
for use in fixing rates of compensation, in testing, certifying, and training 
employees, in handling transfers, and in many other tasks had been made and 
put into effect. 

Fortunately, out of this particular investigation came recom- 
mendations which led to the establishment of a salary standardiza- 
tion plan for libraries, but, in by far the majority of organizations, 
deficiencies even more serious than those found in the libraries of the 
country still exist. That this fact is recognized by the federal 
government is evidenced in a newly initiated project being carried 
on at the present time by the United States Employment Service 
by which a complete and scientific job analysis and specification 
of all positions within the United States is to be drawn into a 
job-specification directory. According to present estimates, this 
will contain a detailed analysis of over 28,000 jobs. The recent 
depression period in many instances has focused considerable 
attention upon the possibilities of this new phase of personnel 
administration. 2 

Objectives of Standardization. Wage and salary standardiza- 
tion has as its chief objective the development of harmony, under- 
standing, and cooperation among employees through the feeling of a 
sense of fair play in wage administration and control. This chief 
aim is usually obtained by means of several specific objectives: 3 

1. The formulation of concise and accurate description of work done by 
each employee. 

2. The classification of employees into different work groups. 

3. The establishment of the relative value of each group. 

1 Proposed Classification and Compensation Plans for Library Positions, 
1927, pp. 8-9. 

2 See National Industrial Conference Board, Salary and Wage Policy in the 
Depression, 1932, p. 33; and ibid., Salary and Wage Policy, 1938-1934, 1935, p. 8. 

3 Adapted from a statement of a company as recorded in Metropolitan Life 
Insurance Company, Salary Standardization and Administration, p. 3. 



358 THE MAINTENANCE OF PERSONNEL 

4. The promotion of merit as the basis for pay and advancement. 

5. The determination of average wage and salary standards with limits for 
work in each position. 

6. The apprehension of cases outside fair limits. 

7. The formulation of a basis for comparing competitive wages. 

Constructing the Salary Groups. The above statement of 
standardization objectives calls for a carefully worked out plan 
of development. There are several steps involved in such a 
procedure. 

1. Review of Each Position. If the position is one involving 
repetitive operations, a thorough job analysis may be needed. If 
this is not suitable then a " position description" blank, calling for 
information concerning the position (title, department, daily and 
occasional duties) should be composed and placed in the hands of 
each employee. This blank when properly filled out includes the 
description of any equipment used and a statement of supervision 
and outside contact responsibilities. 1 

2. Determination of the Number of Groups to Be Created. This 
is a very important part of the procedure, since any error in this 
phase of the work is apt to perpetuate indefinitely unfair wage 
classifications and scales. The major problem here is to determine 
the number of grades into which the positions are to be classified. 
Obviously this depends upon the size and nature of the organiza- 
tion. Some employers have reported as few as four grades; others 
maintain as many as twenty-eight classes for salaried workers alone. 
The following five groups are indicative of the salary classifications 
found in a typical company: office-boy type of work; simple opera- 
tions performed under close supervision; simple skilled operations 
requiring clerical ability, machine knowledge, etc. ; specialized opera- 
tions requiring long experience with the company and a knowledge 
of general practices; and work of a highly confidential nature, such 
as thorough knowledge of industrial and public relations, or financial, 
legal, and similar responsibilities. 2 

3. Determination of the Specific Grade into Which Each Position 
Is to Be Classified. In evaluating the position many factors must 
be carefully recognized. The complexity of duties involved must be 
studied. The variety of responsibilities, volume of work, risk of 

1 For specimen forms, see Metropolitan Life Insurance Company, op. tit, , 
pp. 7-9. 

2 For an excellent illustration of a salary standardization classification 
chart, see Westinghouse Electric and Manufacturing Company, "Functional 
Organisation, " Supplement to Industrial Relations Manual, June 22, 1934. 



WAGES AND WAGE SYSTEMS 359 

error, seriousness of the consequences resulting from error, super- 
vision required and exercised, confidential nature of the work 
handled and previous experience and training required must be 
fairly evaluated. Likewise, the physical effort required, fatigue 
experienced, objectionable character of the task, the length of 
learning period, the contacts required to be maintained both within 
and outside of the organization, and many incidental factors must 
be analyzed in making proper classifications. These gradings may 
be accomplished by arbitrary classification, by ranking according to 
relative value, or by following an established rating scale. 1 

4. Assignment of Value Points or Specific Units of Evaluation. 
The total individual assignments determine the relative grade of 
each position. One company using this method assigns 1 to 3 
points in the rating of duties; 1 to 8 points to executive responsi- 
bility; 1 to 4 points for responsibility in money matters; 1 to 7 
points for experience; and so on down through public contact, sex, 
age, general education, special training, intelligence, and personal 
qualities, until all qualifications have been taken into consideration. 2 
Sometimes, activities and responsibilities rather than positions are 
evaluated in completing the position grading. In shop work, for 
instance, a machine-tool operator might be assigned a maximum of 
50 points for educational training, 100 points for mental effort, 
230 points for skill required, 100 points for physical effort, 220 
points for responsibility, 100 points for exposure to accident hazards, 
and 100 points for general working conditions, making a grand total 
of 1,000 points. After the maximum weights have been assigned 
according to relative importance and value, it is then necessary to 
make gradings for qualifications lower than the maxima. 

5. Establishment of the Actual Maximum and Minimum Limits 
for Each Group. The minimum limits represent the starting point 
for advancement within each wage group; the maximum limits 
mean that further compensation for the job within the group is 
uneconomical, no matter how good the worker is. To pass beyond 
this limit means an advancement in rank or position, with increased 
responsibilities. Limits may be established by comparing outside 
competitive salaries with those falling within each group. Some- 
times they are established by plotting actual wage or salary distri- 
butions upon a scatter diagram. Still another method involves the 
construction of a "pay sheet " or "salary key/' whereby the upper 

1 See Industrial Relations Section, Princeton University, Personnel Pro- 
grams in Banks, pp. 20-22. 

2 Metropolitan Life Insurance Company, op. cit. t pp. 13-14. 



360 THE MAINTENANCE OF PERSONNEL 

and lower limits are arbitrarily established at a certain percentage 
(as 10 per cent) above and below the average current wages within 
the group. 

6. Making of Subsequent Adjustments in the Job Grades or Wage 
Limits. Failure to make necessary adjustments is likely* to defeat 
the entire standardization program. Sometimes a system of 
periodic review of all job grades is provided, at which time every 
time-rate worker is given opportunity to know just where he stands,, 
the bases of his ratings, and what he can expect in the future by way 
of income advancements and promotions. Sometimes, such adjust- 
ments are made only as the need arises. Changes are usually 
recommended to a wage or salary schedule committee, made up of 
several junior executives, chiefs, departmental supervisors, and the 
personnel manager. Occasionally, special-position analyses are 
made at the request of departmental heads. Whatever the cause 
for these reviews, the employee should always have the opportunity 
of knowing what is expected of him, and should be given the 
opportunity of asking questions or seeking advice on matters 
pertaining to his own salary. Furthermore, careful reviews should 
be conducted with the introduction of each new position, machine, 
or method into the organization, and immediate reports on the 
changes of duties relating to all classified positions should be 
insisted upon. 

7. Making Individual Wage Adjustments in Conformity with the 
Scale Constructed. Finally, three significant questions arise: How 
shall the scale be applied to a going organization? How can 
current adjustments be made without disrupting the entire schedule? 
What is to be the relationship between new schedules and hiring 
schedules? In the administration of the system the schedule 
committee should consider each case individually. In any event, 
the present scales should be drawn in line with the new schedules 
as quickly as possible, but quietly, so that the morale will not be 
injured because of a too sudden and drastic change. An effective 
plan of administration should provide a periodic review to keep 
job descriptions and ratings up to date; machinery for the proper 
handling of positions outside the schedule, new jobs, changes, 
variations in conditions; and a certain degree of flexibility. 1 

Advantages of Wage Standardization. The benefits to be 
derived from this procedure are difficult to appraise accurately, 
but its worth in terms of dollars, good will, and the general spirit of 

1 For a further discussion of this problem, see Personnel Journal, vol. 15, 
September, 1936, p. 114, and the Metropolitan Life Insurance Company, op. cit. 



WAGES AND WAGE SYSTEMS 361 

cooperation existing within the organization is bound to be great. 
In completing a 17-year intensive study of job and wage payments 
in civil service, the Civil Service Assembly of the United States 
and Canada concluded, in part: 1 

A classification (standardization) plan serves as a sound factual basis 
for and facilitates the selecting of employees; renders feasible the develop- 
ment, adoption, and continued administration of scientific compensation 
plans for large and complex services ; facilitates budget and appropriations 
processes; displays and organizes the facts necessary for intelligent legisla- 
tive decisions ; and disencumbers all personnel processes from these impedi- 
ments which arise from the imperfect, misleading, or unsystematic naming 
of positions. 

These advantages are bound to accrue to private industry as 
well as to civil service, and, if the system is fairly established and 
properly administered, no serious disadvantages can result from its 
adoption. 

1 Classification and Compensation Plans, 1928, p. 2 (a report prepared by a 
section of the Civil Service Assembly and adopted by that body at its conven- 
tion in September, 1928). 



CHAPTER XIX 

FINANCIAL INCENTIVES 

Positive and Negative Incentives. An effective incentive is 
anything which serves to enlist the willing cooperation of the 
workers in the execution of the functions of a given establishment 
and which impels them to do well the duties assigned to them. 
Incentives may be extra-financial, financial, or nonfinancial in 
character; they may be positive or negative. Extra-financial incen- 
tives are those embracing all rewards providing money inducements 
for the accomplishment of definite quality-quantity standards, 
except the payment of base-time and overtime wages, and usually 
take the form of cash premiums and bonuses which are too uncertain 
and indefinite to be included as a part of the regular wage. Finan- 
cial incentives generally include any form of salary or wage which is 
definitely attached to labor service or productivity. Nonfinancial 
incentives include all other influences, aside from money rewards, 
which stimulate the worker to do his tasks well. Positive incen- 
tives include such things as promotion training, competitive 
contests, performance records, honorable mention, praise, and good 
foremanship. Negative incentives take the form of intimidation, 
antagonism, fear of insecurity, worry, and fear of accident. 1 

Positive incentives imply not only physical exertion, but the 
elimination of waste; the conservation of machinery, tools, and 
equipment; the reduction of absenteeism; the cultivation of loyalty; 
and the assurance of every other condition fundamental to efficient 
production. ^11 wage systems do not offer the same degree of 
incentive^, Some of them actually discourage production and 
prevent effective cooperation and thus tend to be negative in 
character. From the employer's viewpoint, no wage system is 
satisfactory unless it automatically stimulates workers to utilize to 
best advantage the industrial opportunities at their disposal and 
to fulfill the employment obligations imposed upon them by their 
wage agreement with the organization. 

Classification of Financial Incentive Systems. The newer wage 
systems are designed primarily to increase output and improve the 

1 See definitions given in Cost and Production Handbook, 1934 ed., p. 611. 

962 



FINANCIAL INCENTIVES 363 

wage relation, that is, to provide an incentive for good workman- 
ship and loyal cooperation. As suggested in the preceding chapter, 
these newer methods of remuneration, aside from straight time and 
salary schemes, include piece-rate schemes, a combination of wage- 
incentive plans and limited wage-incentive plans. A subclassifi- 
cation of each of these three basic groups is possible, as follows: 1 

1 . Piece-rate incentive systems in which the employee takes all the gain or loss 

o. Piece or straight commission rate. 

6. Taylor differential piece-rate or commission plan. 

c. Merrick multiple piece-rate plan. 

2. Wage-incentive plans in which gain above guaranteed daily or hourly rate is 
shared between employer and employee 

0. Halsey gain-sharing plan. 
6. Rowan premium plan. 

c. Gantt task and bonus system. 

d. Bedaux point system. 

e. Haynes Manit system. 

/. Diemer combined premium and bonus plan. 
g. Baum differential gain-sharing plan. 
h. Barth premium plan. 

1. Other plans, chiefly Dyer, Stevens, Shanley, Keays-Weaver, K.I.M., 
and F.A.M. 

3. Wage-incentive plans in which an arbitrary location of points between two 
variables has been assigned 

a. Emerson efficiency bonus plan. 

6. Wennerlund bonus plan. 

c. Knocppel efficiency bonus. 

d. Bigelow bonus plan. 

e. Ficker machine rate plan. 

/. Parkhurst differential bonus. 
g. Ernst and Ernst plan. 
h. Sylvester bonus plan. 

The chief characteristics of the more important of these indi- 
vidual plans are worthy of detailed consideration. 

Incentive Systems in Which Gains and Losses Accrue to the 
Employee Exclusively. There are three important plans of wage- 
incentive payment by which the worker assumes all the responsi- 
bility for unit production and wage determination. 

1. Piece-rate or Straight Commission System, One of the oldest 
and simplest incentives is that of the straight piece-rate or commis- 
sion basis of compensation. Under this plan, the wage payment is 
made only upon the basis of productivity, on the theory that 
greater opportunities for earnings will impel workers to produce more 
and salespeople to sell a larger volume. Thus, if a machine worker is 

1 Adapted from ibid., p. 614. 



364 



THE MAINTENANCE OF PERSONNEL 



allowed 10 cents per unit for all units of a commodity produced 
meeting acceptable minimum standards of quality, and if 50 
units are produced during the day, then the wage is $5; if 75 units 
are produced, it is $7.50; if only 30 are produced, the pay is $3. 
Likewise, if a salesman is employed upon a straight 10 per cent 
commission basis and if during any 1 week his net sales total $1,000, 
his compensation is $100; if the following week sales increase to 
$2,000, his commission is $200; if later they drop to $600, his 
remuneration is $60, and so on. 

The chief characteristics of this plan are graphically pictured in 
Fig. 25. 



-TOTAL EARNINGS WILL 
AT THIS LEVEL, ETC. 




CAT THIS POINT 
)F PRODUCTION 



NUMBER OF UNITS PRODUCED 

PIECE RATE- COMMISSION PLAN 

FIG. 25. 

There can be no doubt that the straight piece- or commission- 
rate system can offer one of the most powerful incentives for 
increased effort. It has the advantage of being a very simple 
scheme; earnings can be readily computed when production ia 
determined. However, under poor conditions this scheme is likely 
to provide a very weak, if not a negative incentive. It requires 
considerable coaching and supervision, and constant sales or pro- 
duction stimulation when difficulties slow down production. Under 
it earnings tend to be very uncertain, and often the mental worries 
of insecurity dishearten the workers. Sometimes it leads to speed- 
up at the sacrifice of quality. The system places hardship 
upon the beginner, and often leads to an inadequate supply of 
workers. Moreover, it encourages commission cutting or rate 
cutting at the other end of the scale when earnings become abnor- 
mally high or excessive. Finally, the choice of the piece rate is 



FINANCIAL INCENTIVES 



365 



almost invariably open to criticism, and every change in processing 
necessitates a change in rate. 

2. Taylor Differential Piece-rate Plan. As the name of this plan 
implies, two different piece rates are established for each worker: 
one to apply to production below the standard task; the other to 
apply when the worker's production is equal to or in excess of the 
standard task. It is based upon the theory that different piece 
rates for the performance of a certain task will encourage greatest 
efficiency in production. If a worker is paid a straight piece rate 
of 10 cents per piece produced up to a certain point (as 40 units 
per 8-hour day), and 15 cents per unit on the total number of units 
when production is equal to or in excess of the standard task 
(40 units per day), there is a very strong financial incentive to 
maintain or even surpass the standard of 40 units. A simple 
diagram will show the theoretical implications of this plan. 




ABOVE- STANDARD PIECE RATE 



STANDARD TASK 



SUB* STANDARD PIECE RATE 



NUMBER OF UNITS PRODUCED 

TAYLOR PLAN 

FIG. 26. 

In proposing this system, Mr. Taylor sought to discover the 
fundamental and natural laws which he believed governed pro- 
duction. To him, there was a right way and a wrong way to 
perform each task, and the right way could be determined quanti- 
tatively by the measurement of time and motion factors and an 
intelligent understanding of the elements of human fatigue. It was 
upon this major assumption of the scientific determination and 
measurement of production factors that he constructed this incen- 
tive plan. Obviously, care must be exercised in determining the 
standard time for each job, in standardizing the conditions of 



366 THE MAINTENANCE OF PERSONNEL 

work, providing ample and systematic instruction, and maintaining 
intelligent .supervision to aid the worker in attaining the standard 
task. Once the whole scheme of production is scientifically con- 
trolled, successful operation depends upon the individual worker. 
Employees unable to maintain the established quality and quantity 
standard of work receive a piece rate which is relatively so low that 
they will almost automatically become discouraged and seek 
employment elsewhere. The employees who are capable of meeting 
the qualitative and quantitative requirements of the task arc paid a 
high piece rate from 30 to 100 per cent above the average rate for 
the trade or occupation. Exceptional workmen are thus attracted 
to the plant in which this system of wage payment is applied. No 
conditions exist which will reduce them to the dulling dead level of 
mediocrity. 

Such a method of wage payment has marked advantages. There 
is a definite distribution of authority and responsibility. Manage- 
ment is responsible for the accurate determination of the task and 
the standardization of conditions of performance. For this, it 
receives complete control of the increased profits. The workers 
are made responsible for the conscientious and successful application 
of their time, skill, energy, and intelligence, for which they receive 
remuneration far above the average for the industry. Such a sys- 
tem of wage payment cultivates good performance by rewarding the 
exceptional worker in proportion to his efforts. Moreover, it makes 
for economic justice, because it attempts to establish a necessary 
relation between income and service by paying a wage that is com- 
mensurate with ability and application. As Taylor designed the 
plan, there is no arbitrary cutting of piece rates when, because of 
exceptional performance, the workman receives an exceptional 
income. This removes the objectionable feature of the straight 
piece-rate system. 

Despite these advantages, the original Taylor differential piece- 
rate plan has had only limited application in American industry. 
This fact is attributable to deficiencies thought to be inherent in 
the system. The task is so severe that all but exceptional workmen 
fail to complete it and become disgruntled. Such a situation 
will inevitably create a feeling of injustice. The system, moreover, 
is applicable only within certain prescribed limits. It can hardly 
be adapted to miscellaneous operations and, within a given plant, is 
applicable only to routine work. Even in routine processes and 
operations, the system necessitates so much exacting care in pre- 
liminary time and motion studies and standardization of conditions 



FINANCIAL INCENTIVES 



367 



that not many firms are willing to incur either the trouble or the 
expense involved. Whatever" tends to make imperative a redeter- 
mination of the task and of rates will augment the expense involved 
in the application of the plan. The expense would not constitute 
an objection provided the results were satisfactory. But the task 
time is usually so severe and exacting that sustained production is 
problematical, even for high-grade workers. This tends to make 
the earnings of the worker uncertain and so increases the feeling 
of economic insecurity. To avoid this difficulty, some firms have 
modified the original Taylor plan. Instead of setting the low rate 
far beneath the scale prevailing in the trade or community, they 
make it equivalent to that scale. This assures a normal minimum 
wage for average workers. The high rates are still set far above the 
community rate. 

3. Merrick Multiple Piece-rate Plan. Perhaps the most widely 
used modification of the Taylor plan is that known as the Merrick 
multiple piece-rate plan. In basic principle, it is the same as that 
of the Taylor plan, the only difference being that instead of one 
step up in piece rate, the Merrick plan offers two, making a total of 
three different piece-rate scales. Usually this additional rate is 
offered to the worker who is slightly sub-standard with an efficiency 



/ . ABOVE- STANDARD PIECE RATE 



-STANDARD TASK 



/-+ SECONDARY PIECE RATE (SUB- STANDARD) 



X BEGINNER'S PIECE RATE CSUB- STANDARD) 



NUMBER OF UNITS PRODUCED 

MERRICK PLAN 

FIG. 27. 

rating of 80 to 85 per cent, and thus a slightly higher reward is given 
to those who have not been quite able to perform the standard 
task. This plan is well suited for the upgrading of inefficient work- 
ers, who otherwise would not continue under the low Taylor piece 
rate. The plan is flexible and simple, but a large number of compu- 



368 



THE MAINTENANCE OF PERSONNEL 



tations must be used in its application. Although it offers con- 
siderable incentive toward increasing performance, it is open to the 
same major objections as are offered against the Taylor system. 

Incentive Plans in Which Gains Are Shared Jointly. The 
second general type of incentive plans, it will be recalled, comprises 
those which offer a combination of time and piece rates and in which 
gains are shared jointly by employers and employees. 

1. Halsey Gain-sharing Plan. The Halsey gain-sharing (or 
premium) plan is one of the oldest of this type. The originator of 
this plan, F. A. Halsey, believed that a workman is entitled to a 
reward in the form of a premium or bonus equal to somewhere 



70-30 PREMIUM*-/ 




3O-50 PREMIUM 
f 
- 30-70 PREMIUM 

STANDARD TASK TIME 



'TIME WAGE GUARANTEE 



NUMBER OF UNITS PRODUCED 

HALSEY GAIN-SHARING PLAN 

FIG. 28. 

between one-third and two-thirds of the value of the time saved in 
the performance of his assigned task. A task time is established 
for each operation or group of operations and this becomes the basis 
of computation. The time allotted for the completion of the job 
is fairly generous, a fact which is reflected in the relatively low 
premium rate. Once the time limits of a task are fixed, they remain 
unchanged until the nature of the process or operation is modified, 
when a readjustment is made. A special rate per hour is established 
for each operation, so that workmen who fail to attain the standard 
are assured a regular day wage. The general characteristics of this 
plan are presented graphically in Fig. 28. A worker is paid this 
specified rate for each hour that he works. In addition, he receives 
a premium equivalent to 30 to 70 per cent, depending upon the 
difficulty of the task and the value of the time he saves on operation, 



FINANCIAL INCENTIVES 369 

the bonus rate being computed upon the hourly rate. The employer 
guarantees that no change in time will be made without fair adjust- 
ment and that even though the task is not completed within the 
time limits established the operator will receive his full hourly rate. 

The Halsey system of wage payment has many advantages. It 
is comparatively easy and economical to introduce and operate. 
No complicated preliminary time and motion studies, job analysis, 
or occupational rating is necessary. The determination of the 
average previous time in which a job was done is obviously a simple 
matter requiring no expert knowledge. The small amount of 
clerical work required in collecting average time does not involve 
great expense. The system can easily be adjusted to routine, 
unstandardized operations. Revision of rates is easy and not expen- 
sive. Readjustments in the hourly rate and the bonus rate can 
usually be made without incurring the displeasure of the workers, 
because such changes are normally expected as a consequence of 
varying business conditions. Since employer and employees par- 
ticipate in the profit accruing from economy of time, a common 
cause of jealousy and envy is removed. Neither wages nor profits 
tend to soar to unreasonable levels. Since the task time is rather 
generously determined, there is an absence of the driving methods 
to which wage earners are so frequently opposed. In actual experi- 
ence, the system has greatly stimulated interest and production. 
The conservation of time and the opportunity to demonstrate 
superior ability have had a real appeal to the workers. Both wages 
and profits have been increased as a consequence of greater output 
and lower production costs. 

Numerous objections, however, have been raised against the 
Halsey premium plan. It is urged that the system is incapable of 
application to measurable, standardized operations. Because of the 
absence of standardized conditions and because the worker does not 
receive the total amount of increased earnings resulting from econ- 
omy of time, limitation of effort and output is likely to result. Some 
even contend that the system creates a feeling of injustice in the 
mind of the worker because he does not receive a reward propor- 
tionate to the work he has accomplished. The employer shares 
in gains wholly attributable to the energy, skill, and intelligence of 
the worker. On the other hand, the plan may involve injustice 
to the employer when the workers share in the gains resulting from 
technical improvements installed by and at the expense of the 
management. A final objection is that the system encourages the 
dishonest practice of soldiering, since workers will consciously 



370 THE MAINTENANCE OF PERSONNEL 

hustle on certain jobs in order to obtain the premium and conserve 
themselves by relaxing on other jobs, a practice which is made 
possible by the guaranty of the regular hourly wage regardless of 
output. Some of these objections could be removed by paying the 
worker on the 100 per cent plan, under the terms of which he would 
receive a premium equivalent to the total value of the time saved 
in the completion of the job, instead of one-third or one-half, as is 
ordinarily the practice. Perhaps a more equitable, although obvi- 
ously a much more difficult, procedure would be to apportion to 
both management and workers a share in the increased earnings 
proportionate to the contribution which each makes toward economy 
of time arid increased output. The measurement of relative con- 
tribution is admittedly a difficult task. 

2. The Rowan Premium Plan. The Rowan premium plan is 
constructed along lines similar to the Halsey system of wage pay- 
ment in that it accepts the prevailing conditions and standards of 
operation, involves a standard time based upon previous experience, 
assures a regular day wage to those who are unable to achieve the 
standard, and prescribes definite limits beyond which the earnings 
of labor cannot go. The plan comprises: (a) a task time established 
for each operation or group of operations; (6) the determination of a 
definite hourly rate of wages for each operation; and (c) the payment 
of the specified hourly wage for each hour of employment, plus a 
percentage of this rate computed on the basis of the ratio of the 
time saved to the time allowed for the task. If the time saved is 
25 per cent, then the worker responsible for this economy of time 
receives a 25 per cent increase in earnings; if the economy of time 
amounts to 50 per cent, he receives 50 per cent increase in wages. 
Following is a graphic representation of the plan in operation. 

Careful observation of Fig. 29 suggests that under this method of 
payment there is a definite limit to earnings. As the percentage of 
standard or set time saved increases, the base, that is, the wages of 
used time to which the percentage of saved time is applied in deter- 
mining the premium, automatically diminishes. If the workman 
completes the task in 4 hours, thus effecting a time saving of 50 per 
cent, he gets a premium of 2 hours, or 50 per cent of the time actually 
consumed in performing the task. This would give him a job wage 
of $3, of which $2 is the regular total hour wage and $1 is the pre- 
mium. Suppose, however, that he completes the job in 2 hours, 
effecting a time saving of 75 per cent. He then gets a premium of 
only 13^ hours, or 75 per cent of the time used in performing the 
task. This would give him a total hourly wage of $1 and a premium 



FINANCIAL INCENTIVES 



371 



of 75 cents or a total job wage of only $1.75. Thus, he gets less by 
25 cents for saving 75 per cent of time than he does for saving only 
50 per cent. Under such circumstances, the worker will not con- 
tinue to exert himself excessively beyond a certain point, since his 
total compensation for the job does not increase beyond that point 
in proportion to time saved. 

The Rowan plan has been applied successfully, but it has not 
been widely adopted in the United States. Like the Halsey system, 
it is easy and economical to introduce and administer, requiring no 
expert analysis of jobs and no scientific determination of time and 
motion factors, unless the company desires to make such preliminary 



BONUS AS A PERCENT EQUAL 
TO TIME SAVED- 



t 




'STANDARD TASK 



GUARANTEED DAILY WAGE 



NUMBER OF UNITS PRODUCED 
ROWAN PREMIUM PLAN 

FIG. 29. 

investigations. It is adaptable, therefore, to miscellaneous opera- 
tions. The worker finds protection in the absence of excessively 
speeded up tasks and has considerable control of his working pace. 
In so far as the system tends to stimulate production, the employer 
is benefited by increased earnings, since a relatively great incentive 
is offered to produce somewhat beyond the standard task. 

Many of the objections to the Halsey plan are also made against 
the Rowan system of wage payment. The system is not well 
adapted to standardized conditions. Beyond a certain point, there 
is no encouragement to additional exertion on the part of the worker. 
The plan is likely to develop a feeling of injustice, since the premium 
received does not bear a progressive relation to the amount of time 
saved. There is no attempt to apportion to management and 
workers an equitable share of the product which each contributes 
through increased skill, intelligence, and improvements. It is also 



372 THE MAINTENANCE OF PERSONNEL 

objected that the Rowan system involves so complicated a method 
of calculating the premium that the average workman is unable to 
figure how much he has earned on any task, and that this tends to 
preclude the degree of interest in the job that a simpler method of 
payment would assure. 

3. The Gantt Task and Bonus System, The Gantt method of 
payment originally represented an attempt to gain immediately 
some of the many advantages which the introduction of the Taylor 
plan promised to assure more gradually. On this point, Mr. Gantt 
has written as follows: 

Not being ready to introduce the differential piece-rate system, which 
was regarded as the ideal one for obtaining maximum output, I felt that we 
should not wait for perfection but should offer the workmen additional pay 
in some manner that would not interfere with the ultimate adoption of the 
differential piece-rate system. Accordingly, I suggested that we pay a 
bonus of 50 cents to each workman who did in any day all the work called 
for on his instruction card. 1 

This plan was adopted along with the provision that there should 
be paid to the gang boss a bonus each day for each of his men that 
earned the bonus paid to workmen. 

It was soon discovered that the scheme had a fundamental weak- 
ness in that after the men had earned their bonus there was no fur- 
ther incentive to additional production. Subsequently, Mr. Gantt 
devised a satisfactory method for furnishing such an incentive, 
which took the form of paying the workman for the time allowed 
plus a percentage of that time. 

For instance, if the time allowed for a task is three hours, the workman 
who performs it in three hours or less is given four hours' pay. He thus 
has an incentive to do as much work as possible. If the workman fails to 
perform the task within the time limit, he gets his day rate. The time 
allowed plus the bonus is the equivalent of a piece rate; hence we have 
piecework for the skilled and daywork for the unskilled. One other feature 
of this work at Bethlehem had a most important effect upon the result 
namely, that in addition to the bonus paid the foreman for each man under 
him who made bonus, a further bonus was paid if all made the bonus. For 
instance, a foreman having ten men under him would get 10 cents each, or 
90 cents total, if nine of his men made bonus; but 15 cents each, or $1.50 
total, if all men made a bonus. The additional 60 cents for bringing the 
inferior workmen up to the standard made him devote his energies to those 
men who most needed them. 2 

1 GANTT, H. L., Work, Wages, and Profits, 1st ed., p. 101. 
* Ibid., pp. 108, 109. 



FINANCIAL INCENTIVES 373 

From the foregoing description it is clear that under the Gantt 
system the following principles of procedure are involved: (a) a 
task time is determined for each operation or group of operations; 
(b) an hourly rate is set for each worker; (c) the worker who performs 
a task within the time allotted for it is paid for the time allowed plus 
a percentage of that time; and (d) an incentive bonus is established 
for foremen. The size of the bonus varies with the companies that 
apply this method of payment, but ranges between 20 per cent and 
50 per cent of the task rate. The actual operation of the system 
may be seen from a specific case. Assume for example, that the 
regular day rate is on the basis of 40 cents an hour, and the bonus 




-PIECE RATE BONUS 



STANDARD TASK 



^GUARANTEED WAGE 



NUMBER OF UNITS PRODUCED 

GANTT TASK AND BONUS SYSTEM 

FIG. 30. 

is set at 25 per cent of the standard time. Then a workman who 
takes 5 hours to complete a job which should be accomplished in 
4 hours will receive $2 for the job, which, on the basis of 8 hours, 
would mean a daily wage of $3.20, provided the same speed of 
production is maintained. If he had completed the job in the 
standard time of 4 hours, he would have received the regular day 
rate for 4 hours, plus a bonus of 25 per cent of 4 hours, or $2 for the 
job, which, on the basis of 8 hours would have meant a daily wage 
of $4, if he maintained his pace. In case he had finished the task in 
3 hours, he would still have received the day rate for 4 hours and, in 
addition, the 25 per cent bonus, or $2 for the job, which, on the 
basis of 8 hours, would have meant a daily wage of $5.33. As 
Fig. 30 clearly shows, under this plan, substandard workers are 
assured a regular day wage, while those capable of making the 
standard or of exceeding it are really employed on a piece basis. 



374 THE MAINTENANCE OF PERSONNEL 

The Gantt system of payment yields many benefits. The pay- 
ment of a regular day rate to those who are unable to reach the 
standard or who can not consistently maintain it tends to do away 
with the necessity of such workers finding employment elsewhere 
and so reduces labor turnover and makes fairly easy the maintenance 
of the working force. Companies are seldom able to recruit the 
whole of the working force from exceptional men, but are forced to 
employ many of average ability or below in order to assure continued 
operation. The system, moreover, provides a definite incentive to 
increased production on the part of standard and superstandard 
workers, who are remunerated for exceptional work. The exem- 
plary conduct of these workers conduces to emulation on the part of 
those who have not attained the standard, thus raising the produc- 
tion level for the whole plant. Discouragement is prevented by 
the provision that no workman will be allowed to try for the bonus 
until he has received sufficient instruction to assure a reasonable 
basis for the successful achievement of the standard. 

Moreover, there is a conscious attempt to bring up to standard 
the workers who hitherto have not earned the bonus. This is done 
through the medium of the financial incentive provided for foremen 
who receive a regular bonus for each of their men who attain the 
standard and an extra bonus if all their men achieve it. Mr. Gantt 
states, "This is the first recorded attempt to make it to the financial 
interest of the foreman to teach the individual worker, and the 
importance of it cannot be over-estimated, for it changes the fore- 
man from a driver of his men to their friend and helper." 1 If a 
worker continually fails to attain the standard, provision is made 
for his transfer to some other kind of work for which he is better 
fitted. It is a mark of distinction to be known in the shop as a 
standard or superstandard worker, and sometimes these employees 
are organized into an honor society. 

The success of the Gantt system is in no small measure attribut- 
able to the fact that the task time is so determined as to make 
attainment of the standard regularly possible. The bonus can be 
earned by average workers even when delays and interruptions of a 
minor character occur. Under the more exacting piece-rate and 
differential systems, this is hardly possible. Where the Gantt 
method has failed, the underlying cause has not been inherent in 
the scheme but rather in management's failure to provide the condi- 
tions essential to success, such as the accurate measurement of 
time and motion factors; efficient purchasing, planning, and store- 

i Ibid., p. 109. 



FINANCIAL INCENTIVES 375 

keeping; and the determination of proper standards of performance. 
The system has had considerable application in American industry 
and, on the whole, has been very well received. 

4. The Bedaux Point System. This system of wage incentives 
represents one of the newer types of plans. The point, or Bedaux 
(6), is a unit of measurement of human effort consisting of an amount 
of useful work plus time allowances for rest and delay, the total of 
which can be accomplished by an average employee working at a 
normal rate of speed for one minute. 1 A point-standard is the 
number of points allowed for the performance of a given amount of 
work and is set by time-study analysis. If an operator finishes 
200 pieces in an 8-hour day (making allowances for two 8-minute 
rest periods per day) and the point-standard is 3 points per piece, the 
point-hour for this operator is computed as follows : 

(200 X 3) + (2 X 8) . . , . , , 

^ 77 minutes of work done per hour 

Premiums are based on 75 per cent of the points in excess of 
60 per hour. If the above base-rate performance was paid for at 
35^ per hour, the premium would be found thus: 

^ 8 * Q 17 ) X 0.75 X 35 cents - 0.595, or 60 cents 

Thus the base earnings would be $2.80 and the premium 60 cents. 
Allowances are considered as delays beyond the control of the 
laborer and are added to points produced during the day. 

Data obtained through the point system may be used for com- 
plete analysis of labor costs and operating efficiency. The plan, 
provides an incentive for direct labor, guarantees a day rate, and 
allows for rest and delays. Under the plan, operators are rated 
upon a basis of average production, and the posting sheets inform 
the operator of his efficiency rating and bonus for the previous 
day's work. Guarantees are made prohibiting cuts in the standard 
unless a change in production technique occurs. The plan is fairly 
expensive to install, costly revisions are often necessary, and more 
rigid inspection is required which results at times in lowered 
production. 

1 BARNES, R. N., "The Point System of Wage Payment," Factory and 
Industrial Management, vol. 78, September-October, 1929, pp. 566-568; and 
"The Point Plan of Industrial Control," Harvard Business Review f voL 6, 
January, 1928, pp. 219-230, 



376 THE MAINTENANCE OF PERSONNEL 

Other Efficiency-bonus Plans. Other plans within this classifica- 
tion of wage incentives vary only in minor detail from those 
described above. The Haynes Manit system establishes, by means 
of time study, standards which are expressed in terms of man-min- 
utes, hence the "manit" is the standard task of 1 man for 1 minute. 
Likewise, production is computed upon a time basis of minutes, and 
when the production per minute exceeds the "manits," bonuses are 
earned. In order to increase efficiency among supervisors, this 
plan, as is the case with the Bedaux system, provides for the sharing 
of bonuses between worker, supervisor, and company usually upon a 
5-1-4 basis. 

The Baum differential gain-sharing plan embraces the chief 
characteristics of the Taylor and Halsey systems, as does the Diemer 
plan. The Dyer system follows other point systems in principle by 
taking as a unit what the average worker will do in 1 minute and 
then paying a premium for all units above the standard of 60 per 
hour. The Barth premium plan follows the Halsey plan, except 
for the rate of the bonus. Other variations arc found in the Stevens, 
Shanley, Keays- Weaver, K.I.M., and F.A.M. plans. 

Incentive Plans with Two Variables. The third general type of 
efficiency system is really a combination of the other two. Several 
representative plans are noteworthy. 

1. Emerson Efficiency Plan. The most important plan falling 
within the third classification is the Emerson Efficiency Plan. 
In common with Taylor's and Gantt's methods of industrial remun- 
eration, this plan presupposes a scientifically planned organization, 
standardized shop conditions, careful time and motion study, accu- 
rate determination of wage rates, and the provision of all conditions 
auxiliary to successful performance. Efficient planning, purchasing, 
and storekeeping are prerequisites of success; so also is the provision 
of expert instruction, demonstration, and supervision. As in the 
Gantt system, the day wage is guaranteed, regardless of perform- 
ance, so long as the employee remains in the service of the company. 
The feature which differentiates this system from the others is the 
gradual transition from the day rate to the piece rate or efficiency 
reward, with a graduated scale of improvement in production. 

Under the Emerson plan, the following procedure is involved: a 
task time is set for each operation or group of operations; an hourly 
rate is provided for each worker; a table of bonuses indicating the 
incentive reward for varying degrees of efficiency is worked out ; and 
a workman is paid a specified hourly rate for each hour that he works 
and, in addition, receives ajpercentage of this rate in accordance 



FINANCIAL INCENTIVES 



377 



with his demonstrated efficiency. The day rate is paid, together 
with a gradually increasing bonus, after an output of 66.6 per cent 
of the standard has been attained, as is indicated in Table 10. 

TABLE 10. EMERSON EFFICIENCY PLAN 
Simplified Bonus Table 



Percentage of 
efficiency 


Percentage of 
bonus 


Percentage of 
efficiency 


Percentage of 
bonus 


67.0O-71.09 


0.25 


89.40-90.49 


10.00 


71.10-73.09 


0.50 


90.50-91.49 


11.00 


73.10-75.69 


1.00 


91.50-92.49 


12.00 


75.70-78.29 


2.00 


92.50-93.49 


13.00 


78.30-80.39 


3.00 


93.50-94.49 


14.00 


80.40-82.29 


4.00 


94.50-95.49 


15.00 


82.30-83.89 


5.00 


95.50-96.49 


16.00 


83.90-85.39 


6.00 


96.50-97.49 


17.00 


85.4O-86.79 


7.00 


97.50-98.49 


18.00 


86.80-88.09 


8.00 


98.50-99.49 


19.00 


88 . 10-89 . 39 


9.00 


99 . 50 and over 


20.00 



It will be observed that the bonus, instead of starting when the 
standard, or 100 per cent efficiency, is attained, begins at 66.6 per 
cent efficiency, thus providing a reward for the attempt to reach 
the standard as well as assuring a high bonus for exceptional service. 
For efficiencies of 66.6 per cent and below, the worker is paid a 
daily wage only. From 66.6 per cent to 100 per cent efficiency, the 
workman is paid his hourly rate for the time he actually works plus 
an increasing bonus according to his degree of efficiency. Above 
90 per cent efficiency, the bonus increases 1 per cent for each 1 per 
cent increase in efficiency until 100 per cent is reached. For 
efficiencies above 100 per cent, the workman is paid his hourly rate 
for the time he has worked plus a bonus comprising two parts, as 
follows: (a) the full hourly rate for all the time saved; and (6) 20 
per cent of the wages for the time worked. Reward is strictly on 
the basis of efficiency above the minimum day rate, as is illustrated 
in Fig. 31. 

The percentage of efficiency is the ratio between standard time 
and actual time, that is, between the time limit set for the job and 
the amount actually consumed by the worker in completing it. 
Consequently, a worker's efficiency is determined by dividing the 
sum of standard time by the total actual time taken. Thus, if, 
during a period of 2 weeks, a worker has an actual working time of 
90 hours on jobs for which the total standard time is 80 hours, his 



378 



THE MAINTENANCE OF PERSONNEL 



efficiency is 89 per cent. If in the same time he had completed 
jobs involving total standard time of 100 hours, his working effi- 
ciency would have been 111 per cent. A worker is 100 per cent 
efficient when he completes the work in the standard time set for it. 
Those who are unable to achieve an 80 per cent efficiency are 



V) 

o 



BONUS INCREASES AT 
INCREASING RATE 



/- 100 PER CENT 

y EFFICIENCY LEVEL 


^STANDARD 
GUARANTEED WAGE 


^ 6.fl PER CENT 
EFFICIENCY POINT 



NUMBER OF UNITS PRODUCED 

EMERSON EFFICIENCY PLAN 

FIG. 31. 

assumed to be misplaced and at the earliest opportunity an effort 
is made to assign them to work suited to their capacities. Table 
11 indicates how earnings are adjusted to efficiency under the 
Emerson system. 

TABLE 11. EARNINGS UNDER THE EMERSON EFFICIENCY SYSTEM 



Worker 


Stand- 
ard 
time 


Actual 
time 
taken 


Effi- 
ciency, 

% 


Base 
wage 


Bonus 


Total 
job 
wage 


Actual 
earn- 
ings per 
hour 


Total 
wages, 
two 
weeks 1 


A 


80 


120 


66.6 


$48 




$48.00 


$0.40 


$48.00 


B 


80 


100 


80.0 


40 


$1.60 


41.60 


0.415 


49.80 


C 


80 


90 


88.8 


36 


3.24 


39.24 


0.435 


52.20 


D 


80 


80 


100.0 


32 


6.40 


38.40 


0.48 


57.60 


E 


80 


70 


114.2 


28 


9.60 


37.60 


0.535 


64.20 



1 Assumes a 10-hour day and sustained production. 



The Emerson efficiency system of wage payment has much that 
commends it to both employers and employees. The provision for 
a regular day wage offers a desirable measure of economic security, 



FINANCIAL INCENTIVES 379 

the worker being certain of an income whether he qualifies for the 
bonus or not. There is no encouragement to indifference, however, 
since those who do not attain an efficiency of 80 per cent are trans- 
ferred to other work. The payment of bonuses graduated according 
to efficiency is a stimulus to each worker to increase his output and 
thus obtain additional income. The generous treatment of workers 
whp achieve 100 per cent efficiency and over is a distinct incentive 
to exceptional employees. The system does not aim to eliminate 
all but the exceptional workers but rather to raise the standard of 
performance for the average, a distinct advantage over the Taylor 
and Gantt systems. The wide spread of incentive bonuses and the 
provision of careful instruction and supervision do much to improve 
the quality and quantity of work throughout the shop. 

The Emerson method, moreover, is not severely exacting. 
Instead of being calculated for each job, the percentage of efficiency 
is determined for a period of time 2 weeks or a month so that 
if a worker falls behind in one task he can make up the advantage 
on another. Day wages are usually paid weekly, but bonuses are 
generally distributed at the end of 2 weeks or a month, which 
materially reduces the payroll expense. Because there is no abrupt 
break between day rate and efficiency rate, workers seldom suffer 
loss because they missed the bonus output by a small margin. 
Tne graduated bonus scheme makes it unnecessary to introduce the 
detailed job and time analysis which is required by the Taylor, 
Gantt, and several other plans, thus saving some expense. Fore- 
men are subject to less anxiety and strain under the Emerson plan, 
because, if their men do not attain the set standard on one job, they 
can redeem time on the next. Employers, nevertheless, are able to 
allocate to each job the labor cost incurred in its completion. 
Furthermore, it offers increased incentive to counterbalance mount- 
ing fatigue as production is carried higher and higher. 

Some have objected to the Emerson system on the ground that, 
since it is less exacting than certain other efficiency plans, there is a 
conspicuous absence of "drive" and responsibility, or at least that 
these exist in a relatively minor degree. This is probably true, 
but the system assures sufficient drive and responsibility to warrant 
successful performance, at the same time avoiding the abuses which 
are usually associated with the other plans. Because a considerable 
measure of control is left in the hands of the workers, it is obviously 
less easy under the Emerson plan to predetermine output and costs. 
This makes it difficult to fix selling prices over extended periods. 
There is reason to believe, also, that the economies in payroll 



380 THE MAINTENANCE OF PERSONNEL 

expense resulting from the fact that bonuses are not paid weekly 
are debited with the considerable expense involved in calculation 
of the elaborate and fractional bonus rates. 

2. Miscellaneous Plans. Numerous other plans, all more or less 
representing variations or modifications of the plans already 
described, have been proposed to meet peculiar needs. The Park- 
hurst differential bonus plan sets up 15 or more bonus classes, each 
equivalent to 25 cents per day for 100 per cent efficiency, and 
allows for a bonus payment beginning at 60 or 70 per cent efficiency 
to be paid above a minimum base rate. The Bigelow bonus plan 
resembles the Parkhurst, except that the first stage of the bonus is 
made at 73 per cent. Among other similar schemes are the Wenner- 
lund (similar to Emerson but with bonus starting at 74 per cent), 
Knocppel (bonus begins at 67 per cent efficiency), Sylvester, and 
Ernst and Ernst. 

Incentives for Executives. Financial incentives for wage earners 
have received considerable attention throughout this and other 
countries, but little thought has been given to the standardization 
of base rates or the provision of fair and adequate incentive systems 
for executives. Of particular interest in this connection are the 
results of a recent investigation into the practices of compensating 
buyers in a large retail establishment. 1 This study disclosed the 
complete lack of any logical relationship between total salaries paid 
buyers within departments and between departments. In one par- 
ticular case, it was discovered that extra payments made to men in 
similar executive positions within the same company actually 
ranged between 2.4 per cent and 516.6 per cent of their base salaries. 
Again, in one case, it was discovered that the buyer of a department 
showing a net profit of 6 per cent had received extra bonuses 
amounting to 73 per cent of his base salary, while the buyer of 
another department showing a profit of 90 per cent received extra 
compensation of only 5.5 per cent of his base salary which was 
substantially equal to that of the first buyer. In another case 
involving two buyers, both of whom reported total volumes for 
their departments of about $500,000, one was found to be receiving 
a base salary of $8,000 while making a net profit of 18.8 per cent; 
the other received $14,000 in base salary, with a net profit of 11.50 
per cent. But the greatest injustice of this case occurred when the 
first buyer received no extra compensation while the second received 

1 HOPF, H. A., " Executive Compensation: A Problem in Incentives," 
Journal of the Society for the Advancement of Management, vol. 2, no. 1, January, 
1937, pp. 15-22. 



FINANCIAL INCENTIVES 381 

extra bonuses amounting to 18.5 per cent of the base salary. 1 In 
order to correct the conditions described above, an incentive for 
executives including the following specifications was devised: 2 

1. One policy applicable to both base salary and extra compensation. 

2. A uniform basis of computing compensation, on either store-wide or 
departmental lines. 

3. An objective basis, rooted in accomplishment rather than pull. 

4. Basis as certain as the accounting figures in the company's books. 

5. Simple in application, easily understood. 

6. A program which would appeal to employers and employees as fair, 
impartial, and reasonable. 

After a careful analysis of data over a 10-year period, a store- 
wide plan of executive compensation was put into operation. 
Under this plan the actual amount of bonuses for each buyer was 
determined by multiplying the net profit of the department by 
the excess of profit percentage over the 5 per cent profit base. 
Where unusual circumstances prohibited certain departments from 
showing a 5 per cent profit, proper adjustments were made in the 
base salaries of executives, but a rigid rule of no extra compensation 
in such departments also was adopted. 

Another illustration of the inadequacies of executive incentives 
is recorded in reference to a manufacturing company. 3 For a 
number of years, this company had followed the practice of dis- 
tributing among the executives of the company cash bonuses in 
proportion to salaries. In addition, from time to time, shares of 
common stock were distributed with the understanding that upon 
leaving the company the management would have the right to 
repurchase the stock. 

One of the responsible executives within the group was finally 
convinced that a change in this old custom should be made and that 
a new plan should be instituted which would do four things: " 1, take 
full advantage of the remunerations made; 2, reward materially the 
accomplishments of unusual value; 3, provide incentives to indi- 
viduals to which they might be expected to respond; and 4, adjust 
compensation in line with the results produced." 3 

After considerable study a few simple but effective changes were 
instituted. Base salaries of the executive group were adjusted upon 
the basis of skill, judgment, and responsibility. A "cash bonus 
fund" was established, the size of which was determined by an 

1 Ibid., p. 18. 

2 Ibid., p. 19. 
8 Ibid., p. 20. 



382 THE MAINTENANCE OF PERSONNEL 

increasing scale of percentages of the base salary fund supplemented 
by an " incentive bonus fund." Out of these funds, bonuses were 
distributed to those who, in the opinion of the board, had rendered 
signal service to the company. 

Even though the above instances may represent extreme cases, 
they nevertheless serve to suggest that far too often the manage- 
ment does not know of injustices and inconsistencies until a thorough 
review of existing practices has been made. Once the undesirable 
practices are known, it is not difficult to take appropriate steps 
toward remedying the situation. 

The Workers' Reaction to Efficiency Wage Plans. Wherever 
they have boon properly applied and fairly administered, incentive 
wage systems have met with generous response from employees. 
The quality of the product has improved, quantity production has 
increased, labor turnover has been reduced, and many of the causes 
of friction in employment relations have been eliminated. When 
conscientiously applied, such plans have a potential capacity to 
produce a far greater measure of economic justice than the old 
methods of industrial remuneration. Experience indicates, more- 
over, that these beneficial results are in direct proportion to the 
generosity of the bonus; the larger the incentive wage, the greater 
the response. 

Many workers, however, especially members of certain trade 
unions, have frequently developed a relentless antagonism toward 
efficiency wage schemes. It is argued that the basic purpose of 
such plans is to increase production and profits rather than to 
assure greater equity in the distribution of the product of industry. 
The plans are regarded as subtle means of speeding up workers to 
levels which are deleterious to their health and well-being, and of 
encouraging the dishonest practice of cutting the piece rate just as 
soon as the workers' earnings rise above the general average for the 
community. It is denied that the material factors in production 
can be accurately and scientifically measured in quantitative terms. 
The contention is made that even if this were possible there is 
always the human variable contained in the judgment of foremen 
and time-study men who make the determinations, set the task, 
and fix the rate. The uncertainty of the worker's response is 
frequently cited as an objection to such schemes,. The determi- 
nation of the task time and rate by the employer alone is denounced 
as savoring of industrial autocracy, which is one of the major evils 
unionism seeks to abolish. Moreover, the whole scheme of scientific 
management is viewed as a diabolical plan to destroy or forestall a 



FINANCIAL INCENTIVES 383 

democratic system of collective bargaining with independent trade 
unions. 

Unfortunately, many of these criticisms are well founded. The 
selfish manipulation of efficiency wage systems by unscrupulous 
employers and pseudoscientific efficiency experts, whose chief 
purpose has been to speed up the workers only to cut the piece rate, 
is doubtless responsible for this opposition. It should be urged, 
however, that these abuses are not inherent in the new methods of 
wage payment any more than bomb throwing, racketeering, and 
other forms of violence are inherent in trade unionism. Perhaps 
after all, these are not the real grounds for trade-union opposition. 
The late Prof. Hoxie, who made a special investigation of the whole 
subject of scientific management and trade-union reaction to it, 
states : 

Scientific management can function successfully only on the basis of 
constant and indefinite change of industrial conditions the constant adop- 
tion of new and better processes and methods of production and the unre- 
strained ability to adapt the mechanical, organic, and human factors at its 
disposal to meet the demands of those new production processes and 
methods. On the other hand, trade unionism of the dominant type can 
function successfully only through the maintenance of a fixed industrial 
situation and conditions, extending over a definite period of time or through 
the definite predetermined regulation and adjustment of industrial change. 
Scientific management is essentially dynamic in its conception and methods. 
Trade unionism of the dominant type is effective only when it can secure 
the strict maintenance of the industrial status quo. 1 

It is quite possible, however, to introduce efficiency wage systems 
into industries that arc effectively organized and in which there is 
complete recognition of the union, and this is frequently done. A 
well-organized system of collective bargaining providing for joint 
administration of wages, which brings base rates and piece rates 
within the control of both employer and workers, removes much of 
the ground for objection. It is to the absence of machinery for 
safeguarding the piece rate that the workers have objected. The 
arbitrary determination of task time and piece rates by the repre- 
sentatives of the employer without consultation of the workers is 
unacceptable to independently unionized employees. When the 
whole wage system is democratically controlled, common arguments 
against efficiency wage plans lose force. 

1 HOXIE, R. F., "Why Organized Labor Opposes Scientific Management," 
Quarterly Journal of Economics, vol. 31, November, 1916, p. 78. 



384 THE MAINTENANCE OF PERSONNEL 

Whatever objections may be made against the new methods of 
remuneration, it is difficult to see how any equitable system of wage 
payment can be devised without careful analysis of the various 
operations and processes in a given plant or office and the quantita- 
tive determination of the task time and the wage rate. 'Certainly, 
such procedure is fundamental to incentive wage methods. Justice 
in the matter of wages presupposes recognition of the interests of 
both employers and employees. When properly safeguarded, 
efficiency wage plans help to produce desirable labor relations. 

Basic Principles for the Improvement of Efficiency Systems. 
If the newer methods of industrial remuneration are to be applied 
successfully by any individual employer, certain principles of pro- 
cedure must be complied with. It is necessary, first, to construct 
the incentive plan so that the worker's regular day wage plus his 
incentive earnings shall be considerably higher than the standard 
of wages for similar work in the community. Unless this principle 
is adhered to, the worker will soon discover that his added efforts 
are unrewarded, and the incentive plan will fail, as it should. The 
incentive must always be sufficient to interest and stimulate the 
worker. The task time must be determined so accurately and 
the rate set so fairly that injustices will not result. Haphazard 
determination of standard time and rates, which has characterized 
many so-called " efficiency schemes," leads to dissatisfaction. 
Either the task is so easy that workers are able to run their earnings 
to levels which are unreasonable in view of the service performed, 
thus necessitating an arbitrary cut in piece rates; or the task set is so 
severe as to make attainment almost impossible, thus causing dis- 
couragement and opposition on the part of the worker. Both of 
these effects are disastrous and can be avoided by careful time and 
rate setting. 

Once the task and the rate are accurately and fairly determined, 
there should be no revision unless changes in mechanical equipment, 
specifications, and processing make this imperative. In any read- 
justment of either base rates or piece rates, the workers should be 
consulted arid the facts presented to them. Otherwise, revision 
downward will create discontent and mean ruin for the scheme. 
Workers should not be unjustly penalized for interruptions and 
delays which are beyond their control. Imperfect materials, inade- 
quate supplies, poor equipment, bad planning, and intermittent 
break-downs inherent in the industry are obviously not attributable 
to the worker, and he should not suffer loss of earnings on account 
of such conditions. The payment of a minimum day wage helps 



FINANCIAL INCENTIVES 385 

materially in eliminating friction resulting from such circumstances. 
The plan of incentives should not be so complicated that the average 
workman is unable at the end of the day or the week to calculate 
easily his total earnings. If he cannot do this, much of the stimulus 
to increased effort and improved workmanship is lacking. More- 
over, if the calculation of earnings is extremely difficult he tends to 
become suspicious of management's accounting, a condition which 
will lower his efficiency. 

Standard rates may be arrived at on the basis of past perform- 
ance, the general observation of average times, the estimates of 
experienced workmen, or detailed studies of time and motion factors 
in the operations involved. The use of time and motion studies is 
by far the most satisfactory method, provided it is placed in the 
hands of experts and the time-study department, aided by superin- 
tendents, foremen, and employees. Two kinds of rates are involved, 
namely, the base rate and the piece rate. The base rate is the 
amount per hour which the company is willing to pay an employee 
in return for the satisfactory performance of his duty. The most 
successful incentive systems have provision for a basic wage per 
hour. The performance expected in return for the base wage is 
determined when the time studies are made, and is most satisfactory 
when agreed upon by a joint conference of foremen, workers, and 
representatives of the time-study department. Base rates have a 
marked influence upon piece rates, production, and total earnings, 
so careful determination is necessary. The cost of living, the 
prevailing rate for similar work in the community, and the judgment 
of workers and foremen are some of the considerations which influ- 
ence the basic wage. 

Base rates are usually accepted as the minimum wage, to which 
an additional amount, called "piece rates/ 7 is added in the form of 
bonuses, premiums, or some other incentive wage, for all employees 
whose performance is above the minimum. A fundamental assump- 
tion of all incentive systems of wage payment is that no acceptable 
conception of what constitutes a fair wage is possible without a 
correspondingly clear conception of the nature and amount of work 
required in exchange for such a wage. Wages are remuneration for 
work. The pertinent inquiry, therefore, is: What are the elements 
of the task? Such elements include quantity and quality of prod- 
uct, the amount of energy necessarily expended in performance of 
the task, the degree of fatigue, and the conditions of employ- 
ment. Before time studies can be used to determine accurately 
basic rates and incentive wages, working conditions must be stand- 



386 THE MAINTENANCE OF PERSONNEL 

ardized; that is, all conditions that preclude efficient performance 
must be eliminated. This will call for analysis of such factors as 
ventilation, heating, lighting, rest periods, seats, and hazards. 
Once conditions of work are thus standardized, attention is given 
to the analysis of the task. It should not impose undue physical 
and mental strain. These provisions, combined with proper allow- 
ance for rest periods, should safeguard the interests of the employee. 
Extraordinary conditions do not enter into the calculations and 
must in no way be permitted to deprive the operative of his just 
earnings. Management must assume all responsibility for interrup- 
tions which are beyond control of the employee. 

The object of time and motion analysis and standardization of 
conditions is not to speed up the worker, but rather to discover the 
conditions of the easiest and most effective production by eliminating 
the avoidable waste which makes for inefficiency. It is difficult to 
escape the conclusion that such quantitative determinations are 
fundamental to the setting of wage rates which are reasonable and 
equitable for both the employer and the worker. 



CHAPTER XX 

EMPLOYEE STOCK OWNERSHIP 

General Character of the Movement. The recent depression 
period has given rise to serious questions with regard to the sharing 
of business proprietorship with employees through extensive 
employee stock-ownership schemes. Prior to the stock market 
crash of 1929, employee stock-ownership plans had met with almost 
unprecedented success, even to the extent of inspiring hope in the 
minds of some that this development would lead ultimately to the 
democratic ownership of industry throughout the nation. But with 
the precipitous decline in the market prices of stocks came a period 
of waning interest. In many instances, there developed direct 
opposition toward all such schemes, and this greatly retarded the 
growth of the movement. With the upward swing of the business 
cycle, which began in 1935, the employees of many companies again 
manifested a serious interest in this form of ownership. 

Employee stock-ownership plans begin where profit sharing 
ends. As was pointed out in Chap. XVIII, profit sharing accords 
to the workers a share in the profits of the enterprise without requir- 
ing any investment of their own funds. Stock ownership, on the 
other hand, goes further and seeks to encourage the wage earner to 
share in the ownership of capitalistic ventures, assume the risks of 
business investment, and participate in whatever gains may accrue 
therefrom. Profit sharing does not necessarily seek to change the 
status of the laborer; employee stock ownership does. 

Many corporations in the United States have adopted plans for 
distribution of stock among their employees, and in some notable 
cases a major portion of the shares has been placed in the hands 
of the working force. Another phase of this important movement 
for the wider distribution of securities is "customer ownership." 
The sale of 6 and 7 per cent guaranteed cumulative preferred stock 
to customers has been sponsored by public utility companies, with 
the result that hundreds of millions of dollars have been invested in 
these enterprises by consumers. The growth of both of these 
phases of popular ownership of securities was doubtless attributable 
to the general prosperity in the decade following the World War; 

387 



388 THE MAINTENANCE OF PERSONNEL 

the purposive stimulation of thrift and saving during that great 
crisis; and the sound, conservative management of business and 
industrial enterprises which at that time generally increased con- 
fidence in industrial securities as a form of investment. 

The Rise and Decline of the Movement. The idea *of selling 
stock to employees is not entirely new. For many years, attempts 
have been made to give employees access to ownership through 
stock distribution under profit-sharing plans and to dispose of blocks 
of securities to the workers on favorable terms. For several decades, 
important corporations, such as the Illinois Central Railway, have 
given their employees an opportunity to purchase stock. It is 
within the present generation, however, that the movement has 
acquired its greatest momentum, especially in the period from 1920 
to 1930. In May, 1926, more than 200 companies were giving their 
employees an opportunity to acquire stock on some sort of deferred 
payment plan. 1 At the end of that year the employees of 24 leading 
companies owned or were buying a total amount of stock of their 
respective companies equal to 5 per cent of the market value of the 
total shares outstanding. 2 The market value of the average holding 
or subscription of employees in these 24 companies was $1,313 each. 3 
An analysis of 350 employee stock-purchase plans in the United 
States gives the following information as to their periods of 
inauguration: 4 

Number of 
Years of Inauguration Companies 

1900 or earlier 3 

1901-1905 14 

1906-1910 13 

1911-1915 : 30 

1916-1920 Ill 

1921-1925 162 

1926-1927 J7 

Total 350 

Although it is difficult to estimate the actual number of com- 
panies sponsoring stock-purchase plans in 1928 and 1929, it is 
undoubtedly true that profits and general prosperity existing at that 

1 FOERSTER, R. F., and ELSE H. DIETEL, Employee Stock Ownership in the 
United States, p. 8. 

2 Industrial Relations Section, Princeton University, Employee Stock 
Ownership in the United States, 1927, p. 175. 

3 Ibid. 

4 Adapted from National Industrial Conference Board, Employee Stock 
Purchase Plans in the United States, 1928, p. 2. 



EMPLOYEE STOCK OWNERSHIP 389 

time encouraged even a further development. Up to the beginning 
of the great depression, at least two tendencies were evident: 

1. Prior to 1930 there was an expanding program of employee stock owner- 
ship, and many companies that had originally developed such programs were 
enlarging them to include greater numbers of workers and shares. 

2. Up to that time, employees participating in stock-purchase plans were 
usually members of selected groups, such as junior executives, office workers, 
and salesmen. This practice was thought by many to violate one of the 
primary aims of stock-ownership plans; others felt this policy was not only 
sound, but desirable as well. 1 

The phenomenal development prior to 1930 received a severe 
setback during the years which followed the stock market crisis of 
1929. The serious influence of the depression upon employee stock 
ownership plans is clearly illustrated in the results of a recent 
survey covering 64 companies employing 309,317 workers, which 
showed that in 1929 approximately 23 per cent of the companies 
maintained stock-purchase plans for the workers, but that by the 
end of 1936 only 1 per cent of the companies surveyed maintained 
such plans and that only 12 per cent of the employees were affected. 2 
It is, however, important to observe that many of the leading 
business organizations in the nation have maintained their stock- 
purchase plans in modified form throughout the depression period or, 
more recently, have inaugurated considerably revised savings plans 
for the mutual benefit of employer and employee. Out of some 
10,000,000 individual stockholders in the United States it has been 
estimated that in 1933, over 1,000,000, or 10 per cent, were factory 
employees participating in some type of stock ownership scheme. 3 

Reasons for Initiating Stock-ownership Plans. A congeries of 
motives has led to the introduction of employee stock ownership 
schemes. Each employer has his own reason for incorporating 
such plans. Many are convinced that only in this way can wage 
earners ever obtain a share in the ownership of industry and par- 
ticipate in the profits which they have helped to produce. Closely 
associated with this* motive is the hope that the worker's acquisitive 
desire will thus be satisfied, and that this will increase his interest 
in his employment relationship. Where employers have sensed the 

1 Ibid, 

* Factory Management and Maintenance, vol. 94, December, 1936, p. 39. 
Another study found that "by 1936 only one-fourth of the plans established 
prior to 1929 were still in existence" among the several hundred companies 
surveyed, and many of these were not being vigorously applied. (Ibid., p. 26.) 

3 Ibid., vol. 94, August, 1936, pp. 32-33. 



390 THE MAINTENANCE OF PERSONNEL 

economic insecurity which characterizes the life of the average 
wage earner, they have seen the necessity of promoting thrift and 
accumulation for the inevitable days of illness, old age, and other 
exigencies which are prolific sources of distress. The motivation in 
many cases issues from the belief that employee stock ^ownership 
will create interest in the job and the company, reduce the turnover 
of labor appreciably, and improve generally the relations between 
management and employees. Some of the most prominent plans 
now in operation have had their inception in the desire to reward 
faithful and efficient employees and to provide a relatively safe 
place for the investment of their surplus funds. In a few cases the 
plans have been introduced as a means of providing for employee 
representation on boards of directors or of gaining a wider distribu- 
tion of stock ownership. 

Possible Variations in the Plans. In constructing a plan for 
the distribution of shares of stock among its employees, a company 
may adopt one of several general principles, or some modification of 
them. First, it may decide that the purchase price of the stock 
shall be paid completely by the employee. This principle has been 
widely applied. The stock is sold to the employee at its current 
market value, at par, or at a discount. The second possibility 
incorporates a plan of joint payment under the terms of which both 
the company and the employee assume responsibility for payments. 
Some of the largest corporations in the United States have applied 
this principle with remarkable success. Finally, the company may 
present its employees with shares of stock, in which case it may 
retain possession of the securities, the employees receiving only the 
dividends. The stock may carry no voting privileges, although in 
certain cases employees have been given the opportunity of selecting 
one or more members of the board of directors. Eligibility to 
participate under such a plan is usually based upon good standing, 
length of service, type of position held, or some similiar condition. 

Either as a variant of the foregoing types or as an addition to 
them, a fourth plan involving profit-sharing features is sometimes 
inaugurated, the profits being distributed partially or wholly in the 
form of stock. Net earnings are divided equally between the 
employees and the regular stockholders, the shares of the former 
depending upon general employment record, length of service, and 
degree of responsibility attached to the position held. 

The practice is sometimes adopted of distributing stock as a 
reward for meritorious service to the company, quite apart from any 
formal profit-sharing features, Length of service, unusually efficient 



EMPLOYEE STOCK OWNERSHIP 391 

work in building up the business in its early stages, inventions of 
machinery, improvement of old methods and processes, and general 
loyalty to the company are among the bases for distribution. 

General Features of Typical Plans. As a means of creating a 
bond of mutual interest between management and employees, stock 
ownership plans are admittedly still in the experimental stage, a 
fact which probably accounts for the absence of uniformity in basic 
principles and methods of procedure. Despite this, the plans of 
both small and large companies contain general features in common. 
At stated intervals, the company offers shares of stock either to the 
whole of its employees or to certain classes. Eligibility to partici- 
pation is normally based on continuous service for a specific period, 
usually 1 year; but sometimes, as in the case of the American Cast 
Iron Pipe Company, the amount of stock each employee is allowed 
to buy is commensurate with his service record. 1 Although officers 
and directors are often excluded and only executives are eligible 
under some plans, the tendency now is to include all employees. 
Not a few plans deny participation privileges to employees receiving 
more than a stated wage or salary. In some plans, a minimum of 
a certain number of shares is established. In others a maximum 
subscription of from 20 to 25 per cent of annual earnings is estab- 
lished; still other plans limit the number of shares which may 
be taken in relation to earnings by prorating each share to so many 
hundreds of dollars in wages. Subscription payments usually 
amount to a fixed minimum percentage of the employee's earnings 
and are payable in weekly or monthly installments. In cases where 
no specific limitation on subscription is made, as well as in other 
cases, employees are discouraged from subscribing for more than 
they can pay for with comparative ease and regularity. If the offer- 
ing is oversubscribed, smaller subscriptions are usually allotted iiifull 
and larger ones are scaled down. Sometimes the percentage for 
which an employee may subscribe is based upon his length of 
service with the company. 

Stock is usually sold to employees at the market price, but 
sometimes it is disposed of at par or at book value. The employee 
investor often enjoys distinct advantages over outside investors in 
that payment for his stock is aided materially either by the com- 
pany's contribution to the principal, or by a bonus, the payment of 
which is contingent upon continued service with the company and 
the retention of the stock for a period of years. Often the company 
contributes an amount ranging from 33 to 50 per cent of the 

1 Steel, vol. 98, Apr. 20, 1936, p. 16. 



392 THE MAINTENANCE OF PERSONNEL 

employee's payments, the sum being credited to his account. 
Bonuses paid for continued service and retention of stock range 
from 50 cents to $5 a share annually, the payments continuing 
usually for 5 years. Considerable sums in unpaid bonuses often 
accumulate because of forfeitures by those who leave tjie firm or 
fail to hold their stock. These funds, which draw interest at 5 or 6 
per cent, are distributed at the end of the bonus period among those 
employees who have complied with the conditions of the plan. 

Although many companies allow an employee to pay cash in 
full for his stock if he wishes, the general practice is to provide for 
purchase on the installment basis through deductions from wages. 
In order to decrease clerical costs, it is desirable to make deductions 
monthly, even though pay day comes more frequently. Install- 
ments are a fixed amount in even dollars or a percentage of the 
wages, the total subscription to be paid in a certain length of time, 
ranging from 1 to 5 years. Most plans specify maximum deduc- 
tions of from 10 to 25 per cent of the wage. If the purpose of the 
plan is primarily to encourage thrift, the percentage is considerably 
lower. 

Dividends declared on stock subscribed for by the employees 
are usually credited to their account. Credits accruing from this 
source are offset, in part, at least, by the interest charged on 
deferred payments. The company guarantees that the sum of the 
installments plus accrued dividends will be sufficient to complete 
payment for the stock within the specified period. It is customary 
for the company to retain possession of the stock during the period 
of payment and to surrender the same upon completion of the 
installments. 

Circumstances may arise which make it difficult or impossible 
for the employee to meet his payments. At its own discretion, the 
company may suspend payments in case of necessity, such as ill- 
ness, disability due to accident, temporary unemployment, leave of 
absence or an unduly severe period of depression. Because the 
average wage earner's payments represent the only savings he 
possesses, it is imperative that any acceptable plan of stgck owner- 
ship shall provide for concellation by the worker in case of need. 
Most plans contain such a provision; the employee, upon request, 
is granted this privilege in case of illness, permanent disability, or 
leave of absence. There is usually a time limit on suspension but 
this may be extended if necessary. Upon return to regular employ- 
ment the employee is usually given the opportunity of making up 
his back installments or the company may extend the time limit 



EMPLOYEE STOCK OWNERSHIP 393 

for completion of payments. Full cancellation is permitted by 
some companies. An employee may receive only a refund of his 
own payments, but it is customary to give him his principal with 
interest from 3 to 6 per cent. At such times, the worker forfeits 
his share of accumulated unpaid bonuses, but interest charged 
against deferred payments is cancelled. 

The privilege of cancellation is also retained by the company. 
The employer may terminate the arrangement if an employee 
defaults on his payments for a specified period of time, fails to 
make a certain number of payments, voluntarily or involuntarily 
leaves the service of the company for causes other than death, 
disability, or retirement on a pension, or fails to report for work 
when requested to do so following a layoff. Sometimes, other 
conditions may occasion cancellation by the employer, such as the 
failure of an employee to retain two-thirds of the stock which he 
purchased under previous plans or an attempt to sell or transfer 
rights under the terms of subscription. Sometimes participation 
automatically ends at death or retirement on a pension. In cases 
of cancellation by the company, the adjustments made are similar 
to those which obtain under cancellation by the employee. 

If an employee dies before his subscription is fully paid, it is 
the general practice to refund to his beneficiary at least the paid-in 
installments with interest, or to permit the beneficiary to complete 
the payments. A number of companies reserve the right to deliver 
to the beneficiary stock equivalent to the paid-in amounts, with 
interest. Pensioned employees are usually permitted to continue 
their payments on a subscription but are not granted the privilege 
of further subscription. Many companies terminate the arrange- 
ment when an employee is pensioned, in which case the adjustments 
made are more liberal than in cases of resignation or dismissal. 
He is given all stock held for him, both the shares he had paid for 
and those which are credited to his account through the company's 
contributions. In a few cases, the less liberal practice obtains of 
refunding to him only his own payments with interest. 

A special effort should be made to reduce the employee's risks 
to a minimum and to safeguard his interests in every particular. 
The favorable price at which the stock is offered to him, the pay- 
ment of special bonuses and extra dividends, the company's contri- 
butions to the total payment, and the refund privileges in cases of 
emergency or termination of service are evidences of favored treat- 
ment. In order to encourage retention of stock, loans are some- 
times made on shares which have not been completely paid for, but 



394 THE MAINTENANCE OF PERSONNEL 

such stock cannot be pledged as collateral for a loan negotiated by 
the employee with an outside agency. In fact, the assignment, 
pledge, sale, or transfer of stock not fully paid for is explicitly 
forbidden. 

Stock certificates are usually delivered to the employee as soon 
as possible after completion of payments. In some cases, the 
employee must agree not to sell his shares for a certain length of 
time, even though they are fully paid for and the certificates have 
been delivered. The purpose of this is to prevent employees from 
seizing the first opportunity to make a profit and to preclude 
absentee control of the enterprise. 

Usually only one kind of security is offered either preferred 
stock or common stock, more frequently the latter. Sometimes both 
are issued in a specified ratio. In some instances, an "employees' 
special stock " is issued which is preferred as to assets before com- 
mon stock, is generally nonvoting, has a par value of $10, and is paid 
a dividend of from 6 to 8 per cent. In case of necessity, the com- 
pany sometimes promises to repurchase such stock at a price approx- 
imately the original figure. Regular stock issued to employees 
carries voting power, which may be exercised as soon as payments 
are completed. In the meantime, the stock is voted by the trustees. 

It is essential that employees be given absolute freedom of choice 
in the matter of purchasing stock, and employers exercise consider- 
able care to safeguard such freedom. The literature announcing 
stock ownership plans frequently contains a statement similar to 
the following: "No employee is under any obligation to purchase 
stock. The present standing and future prospects of an employee 
will not be affected in the least degree by his decision as to the 
purchase of stock." On the other hand, it is made clear that the 
purchase of stock by employees does not impair in any way the com- 
pany's right of discharge. Often a special attempt is made to 
present both the advantages and risks of stock ownership and the 
possible fluctuations in the market price. 

Stock offered for sale to employees is usually purchased in the 
open market. It may, however, be donated by or purchased from 
a large stockholder, or it may be treasury stock or certain blocks of 
stock previously unissued. About a month before the subscription 
date, a circular letter is sent to employees, specifying the dates 
between which subscriptions will be received, the total number of 
shares available, the number of shares each employee may purchase, 
and the terms of purchase. A subscription blank usually accom- 



EMPLOYEE STOCK OWNERSHIP 395 

panies this letter and often takes the form of a contract, the signing 
of which binds the employee to the terms of the purchase. 

In inaugurating employee stock-ownership plans, it is customary 
for the company to reserve the right to amend, change, or terminate 
the plan at any time. It also reserves the right to withhold exam- 
ination of its books and to provide such machinery of administration 
as it deems necessary and wise. Employees may or may not be 
given special representation on the company's board of directors. 
Administration of the plan is ordinarily entrusted to a board of 
directors, a special committee, or special trustees chosen by the 
company. In some cases, an individual officer of the company has 
been given administrative responsibility in the matter; in others the 
duty is assigned to the employees' benefit association. All expenses 
of administration are borne by the company. 

Some Encouraging Results. It is probably still too early either 
to measure the results of employee stock-ownership plans or to 
predict their future growth, although the period preceding 1938 
has yielded valuable experience as to the relative strength of differ- 
ent plans. The conclusions of employers, based on experiences, do 
not agree upon the practicability of various schemes. Yet many 
employers are convinced that their experiments with respective 
plans warrant unqualified endorsement. They contend that the 
movement has encouraged thrift, enhanced the worker's knowledge 
of the problems of business and finance, reduced labor turnover, and 
created a deeper interest in the job and company. Others claim 
that distribution of stock among their employees has tended to 
increase output, improve the general quality of workmanship, and 
give the workers a real share in profits. It is pointed out further 
that in making the worker more appreciative of the problems of 
business administration and in satisfying his desire for ownership, a 
spirit of conservatism is cultivated which issues in more harmonious 
employment relations. 

In spite of the estimate that more companies dropped employee 
stock-purchase plans during the depression than retained them, 1 
recent records of plans offered employees by leading companies 
throughout the nation indicate that there is real merit in the schemes 
and that, if properly administered, they can become an important 
factor in improving labor relations. In the spring of 1936, Sears, 
Roebuck and Co. announced an extension of its stock-ownership 
plan. This plan is voluntary, yet is taken advantage of by 95 per 

1 National Industrial Conference Board, Effect of the Depression on Industrial 
Relations Programs, p. 5. 



396 THE MAINTENANCE OF PERSONNEL 

cent of those eligible to join after being with the company 3 years. 
Five per cent of the worker's salary goes into the plan each year, and 
this amount is matched by the company's contribution of 5 per 
cent of profits. The money is then invested in the company's 
common stock at market price and credited to the employees' 
account. Dividends are used to buy more stock. During 1936, the 
company gave $1,699,647, which was credited to the employees' 
account in units of service. Each worker with 10 years of service 
received $1.77 from the company for each dollar subscribed for 
company stock; those with 5 years of service received $1.18; those 
with a shorter service period received 59 cents for each dollar sub- 
scribed. Withdrawals are permitted after 10 years, except that 
women with 5 years of service who leave because of marriage receive 
full benefits, as is also true of employees of any service period laid 
off while in good standing. Those who leave before 10 years of 
service or are dismissed for inefficiency or misdemeanor receive 
their deposits plus 5 per cent interest compounded semianiiually. 
Under this scheme, a man who has earned $100 a month for 20 years 
would have credited to him cash and securities totaling $17,819, of 
which he deposited only $1,200.* 

In 1933, the United States Steel Corporation offered 200,000 
shares of common stock of the company to employees at $27 a 
share. Including these shares, employees hold approximately 
one-eighth of the total number of shares outstanding. Although no 
dividends were being paid at the time this offer was made, special 
benefits of $2 a share during the first 2 years, and $3 a share during 
the remaining 5-year period of purchase were given those who 
bought the stock when offered. 2 In the Kohlcr Company, workers 
are permitted to buy the company's 7 per cent preferred stock in an 
amount depending upon length of service, payments being made by 
means of monthly payroll deductions based upon the amount pur- 
chased. 3 In 1915, the Leeds and Northrup Company first intro- 
duced employee stock ownership, and, by 1932, workers owned 
46 per cent of all common stock of the company. 4 One class of 
stock, known as "employees' shares," carries with it full voting 
rights and composes the basis of employee ownership. These 
shares may be held by only those workers selected from a group 
with at least 5 years of service and with earnings of at least $1,500 

1 American Business, vol. 7, May, 1937, pp. 15-16. 

2 Management Review, vol. 22, April, 1933, p. 117. 

3 BALDERSTON, C. C,, Executive Guidance of Industrial Relations, 1934, p. 136 
* Ibid., p. 149. 



EMPLOYEE STOCK OWNERSHIP 397 

per year. They are not distributed upon an installment plan, and, 
upon leaving the organization, the shares must be sold to another 
employee who is acceptable to the management. The price of these 
shares is determined by taking an average of company earnings over 
a 5-year period. On June 30, 1933, no less than 1,851 employees 
of Procter & Gamble held 114,854 shares of company stock, pur- 
chased by means of weekly payroll deductions and dividend earn- 
ings. 1 The Standard Oil Company of New Jersey has a liberal stock 
purchase plan whereby it is possible for an employee with 1 year 
of service to buy shares upon the installment basis, the company 
contributing 50 cents for every dollar subscribed by the worker. 2 
An unusual feature of this plan is that the purchase price of the stock 
is adjusted twice each year. Other notable plans are offered by 
such companies as the American Telephone and Telegraph Com- 
pany, General Electric Company, Philadelphia Rapid Transit 
Company, and the Consolidated Gas Company. 

Failures and Their Causes. Citation of the above facts is not 
intended to convey the idea that all employee stock-ownership plans 
have been an unqualified success. A number have failed to achieve 
the purposes for which they were designed. Failure has been due 
to many causes. Frequently employees have lost interest in the 
plan and have discontinued their payments, or, if payments have 
been completed, they have disposed of their holdings when market 
quotations offered a profit or showed evidences of decline. In many 
cases, unforeseen circumstances have prevented the completion of 
payments or forced the premature sale of paid-up stock. Not 
infrequently failure has been due to certain deficiencies in the nature 
and administration of the plan. It appears that the greatest success 
has been achieved by those plans in which stock is either given to 
employees or where the company makes a significant contribution. 

Conditions of Success. In those plans which require the 
employee to pay the complete cost of the stock, success seems to be 
contingent upon certain conditions. First, the relative percentage 
of skilled and unskilled workers employed and the type of employees 
generally attracted to the company are conditioning factors. 
Skilled workers who have larger incomes are more likely to par- 
ticipate in the purchase of stock than unskilled, although there are 
notable exceptions. The prosperity of the company is a second 
factor. Concerns whose prosperity is fairly continuous and whose 
stock is generally regarded as high class usually have little difficulty 

i Ibid., p. 168. 
/6td., p. 189. 



398 THE MAINTENANCE OF PERSONNEL 

in operating successful employee stock-ownership plans. The task 
is more arduous for smaller companies. A final condition of success 
is the relative amount of holdings in the hands of executives. Where 
executives in important positions show a disposition to purchase a 
considerable number of shares of stock and have complete confidence 
in it as a form of investment, emulation seems to spread among the 
rank and file of employees and stock subscriptions mount. 

Opposition to the Movement. There is considerable opposition 
to the movement for employee stock ownership. Antagonism is 
evidenced in many places. Socialists and others who sponsor 
movements for the destruction of capitalism and the reorganization 
of society on a collectivist basis look with disfavor upon such schemes 
as tending to strengthen the workers' faith in the existing social 
order and to weaken the intensity of the class struggle. Discontent 
is the foundation of successful radicalism and any compromise with 
capitalism is frowned upon. Trade unionists, who in the United 
States are inclined to accept capitalistic civilization, oppose 
employee stock ownership and similar ventures in personnel admin- 
istration on the grounds that these schemes are designed to serve 
as a substitute for independent collective bargaining and aggressive 
unionism. With such welfare plans, it is asserted, the employer 
hopes to divert the attention of the workers from the more impor- 
tant matters of decent conditions of employment, desirable stand- 
ards of wages, and respectable hours. 

Many employers fail to find in such schemes any hope for the 
improvement of industrial relations. Several objections are urged. 
Stocks are viewed as essentially speculative in nature and hence 
unsuited to the small savings of the working class who can ill afford 
to lose. An employee's holdings are usually so small that his 
financial interest in the enterprise can hardly be stimulated through 
the knowledge that he owns a few shares of stock in it, especially 
when, as in many cases, his stock carries no voting power. It is 
further urged that such plans do not conduce to stabilization and 
loyalty, since the possession of a few shares of stock would not deter 
the average employee from leaving the service of the company 
should he desire to seek employment elsewhere. Finally, it is 
stated that experience with employee stock ownership in the United 
States is not reassuring with regard to its effect upon efficiency, 
economy, thrift, good will, and the conversion of radical workers to a 
more conservative point of view. 

There is doubtless a tendency in some quarters to exaggerate 
the influence of employee stock-ownership plans upon the democratic 



EMPLOYEE STOCK OWNERSHIP 399 

ownership of industry. In this particular result, the surface is 
barely scratched. A study of the ownership of corporations made 
by the Federal Trade Commission indicates that the workers as 
yet have only an insignificant share in the total ownership of indus- 
try. This report showed that employees comprised 7.5 per cent 
of the common and 3.5 per cent of the preferred stockholders, but 
employee holdings represented only 1.5 per cent of the common 
and less than 2 per cent of the preferred stock. 1 Nor does it seem 
that officers and directors fare as generously in corporation owner- 
ship as is often assumed. Of the total common stock holdings, 
officers and directors apparently owned about 10 per cent. They 
held 6 per cent of the total preferred stock. In number, however, 
officers and directors constituted only about 2 per cent of the total 
common stockholders and only about 1 per cent of the preferred. 2 
While such data may be looked upon as belittling the growth of 
employee stock ownership, they may as legitimately be interpreted 
as an index of the extent of the problem and the need of greater 
vitality. 

The most serious of all weaknesses of these schemes has been 
clearly emphasized by the experience gained during the years of the 
great depression. The average of 35 stocks sold by 31 different 
companies in employee stock-ownership plans was 98% in 1926, 
115 in 1929, 107 in 1930, and 14% in 1932. Under the plan of one 
large bank, stock sold to employees at $200 a share was still being 
paid for in installments after it was being quoted on the market at 
$14 a share. 3 An officer of another bank sums up this difficulty by 
stating: 

Our stock purchase plan has been very hard on low salaried employees. 
Our net conclusion is that the bank will not again promote such a plan, and 
that stock will be sold to employees only outright. The average employee 
seems to take the position, where the bank promotes a plan of payment 
over a long term, that the bank assumes a moral obligation to maintain the 
value or price over the term of payments. On a rising market the plan is 
most successful; on a falling market it complicates relations with the 
employees beyond any benefit conceived. 4 

The only escape from this criticism is for the company to pur- 
chase the stock for employees. However, in the degree to which 

1 Federal Trade Commission, National Wealth and Income, 1926, p. 7. 

2 Ibid. 

8 Industrial Relations Section, Princeton University, Personnel Programs 
in Banks, 1935, p. 36. 
*Ibid., p. 38. 



400 THE MAINTENANCE OF PERSONNEL 

this is actually done the plan ceases to be a stock-purchase plan, 
although certain advantages may still accrue through employee 
ownership. Whatever objections may be raised against the move- 
ment, it is certainly an improvement over the old restricted owner- 
ship of industry, and the efforts of employers to share ownership 
with the largest possible number of employees deserve commenda- 
tion. If by such plans the traditional master and servant con- 
ception of employment relations can be destroyed, much will have 
been accomplished toward the assurance of industrial peace. For, 
after all, the workers' benefits under these plans are evident and 
direct, and those which accrue to the employer are less obvious and 
are indirect. The company does not obtain a higher price for its 
stock when it sells to employees; more often it gets a lower price. 
Moreover, the influence of stock ownership upon the worker's 
output is not always positive. 

Some Necessary Precautions. If the movement for employee 
stock ownership is to achieve greater success, it will be necessary to 
exercise sound judgment and adopt frankness in the inauguration 
of the plans. Not all companies are in a position to offer stock to 
their employees; the shares of some concerns do not constitute a 
desirable form of investment. The worker cannot afford to specu- 
late, so only those firms should offer stock whose business is well 
established and whose securities enjoy a reputation for steady 
earnings. Similarly, not every wage earner is in a position to invest 
in stock, so a company should not endeavor to include all its employ- 
ees in the plan. In introducing the plan, it is imperative that the 
nature of the investment be discussed frankly with the employees 
and its attendant risks and probable gains clearly outlined. Other- 
wise, if business adversities develop, the workers will hold the com- 
pany completely responsible for their losses. 

Under no circumstances can a company be justified in allowing 
overinvestment on the part of employees. Scrupulous honesty and 
truthfulness must characterize all representations concerning the 
plan, and its interpretation must be always reliable. Voting privi- 
leges should be granted with all stock issued to employees, but the 
importance of voting power must not be exaggerated. In certain 
large companies, employees own about one-tenth of the stock, in 
some others they own from one-fourth to one-third, but this is far 
from assuring control of company policies through the exercise of 
voting privileges, since in joint-stock concerns a democratic basis 
for voting does not obtain. The employer should not harbor the 
impression that the stock-ownership plan will immediately establish 



EMPLOYEE STOCK OWNERSHIP 401 

an indentity of interests, or that in the absence of decent conditions 
of employment it will conduce to harmony. 

The desirability of employee stock ownership can hardly be 
questioned. Few will deny that employees who are familiar with 
the everyday operation of the enterprise tend to make a better class 
of investors than the absentee holders of stock who never see the 
industry and are interested only in its capacity to pay dividends. 
Moreover, if employee stock ownership assures greater diffusion of 
industrial ownership and elevates the wage-earning class into a 
capitalist class, it will be welcomed by all who believe in constructive 
economic change. If, to the worker's earned income, employee 
stock ownership adds an appreciable investment income, the severity 
of economic insecurity will be diminished. The movement is 
essentially a capitalistic one and is designed to open the door of 
ownership to the worker. This is a sufficiently legitimate basis for 
any stock-ownership plan'. It is a far better reason for the move- 
ment than those which develop from a wish to conceal undesirable 
conditions of labor or to smother spontaneous attempts to unionize 
for self-defense. 



CHAPTER XXI 
THE EDUCATION AND TRAINING OF EMPLOYEES 

Need for Training Programs. In periods of economic recovery 
and general business prosperity, employers are very likely to need a 
new and better labor supply. Perhaps at no other time in the 
history of the United States has this need for better trained employ- 
ees been more keenly felt than during the period immediately fol- 
lowing the 1930-1934 depression. By 1937, production had reached 
an all-time high, and employment had at least reached its pre- 
depression level. In a number of industries, there were acute 
shortages of competent and well-trained workers, especially in 
certain industrial centers of the nation. 

There are several important reasons why this demand for skilled 
workers should be felt during normal times; there are other obvious 
reasons why it was experienced in 1936 and 1937. The Department 
of Labor has estimated that there occurs an annual loss of 5 per cent 
in the employment ranks of the average organization, due largely 
to normal labor turnover, promotions, death, superannuation, and 
change of occupation. 1 Thus, in the city of Detroit alone, among 
66,000 skilled workmen who were employed during 1937, some 3,300 
normally would have to be replaced during the year. To meet this 
situation, the manufacturers of that city have organized under the 
direction of an Employers' Association an intensive apprenticeship 
system, which has been supported by over seventy-four firms. 2 

The need for well-trained workers is greatly accentuated by poor 
business conditions for two simple reasons. At that time indus- 
trial production is curtailed and many skilled workers are thrown 
out of their regular employment. As the months and years of 
unemployment pass, those unfortunate enough to have lost their 
jobs succeed in gaining employment finally in some other line of 
private endeavor, accept relief, or are forced into complete idleness. 
In any event, the result is the same; their skill is soon lost, and when 
business conditions again warrant reemployment many thousands 
of once competent skilled workers are unable to requalify for their 

1 See American Machinist, vol. 81, May 5, 1937, p. 363. 
2 CARPENTER, O. F., "Detroit Trains," Factory Management and Mainte- 
nance, vol. 94, July, 1936, p. 7. 

402 



THE EDUCATIO